3-2-1 and 2-1 Buydown Programs & Buydown Calculator
Lower your rate for the first two or three years, then settle into your note rate. Run your own loan amount and note rate below and compare both programs year by year.
By Saman Khanian
Mortgage Professional
Buydown calculator
Your rate and payment in every year
Enter your loan amount and note rate, then choose a 3-2-1 or a 2-1 buydown. You'll see the effective rate and principal-and-interest payment for each year, plus what you save each month.
Your loan
Principal and interest only — taxes, insurance and HOA are not included. 30-year term, no extra payments.
Apply NowYear 1 saving / mo
$752
3-2-1 total savings
$19,719
Lifetime vs. note rate
$57,649
Full note payment
$2,661.21
Year 1
12 mo · mo 1–12
Year 2
12 mo · mo 13–24
Year 3
12 mo · mo 25–36
Years 4–30
324 mo · mo 37–360
Payment by period
Monthly principal & interest. Same scale for every bar.
Annual payment over 30 years
Gold bars = your buydown plan each year. Dashed line = the same loan at the full note rate.
What this means
On a $400,000 loan at 7.00%, the 3-2-1 plan saves $19,719 over its discounted years compared with paying the note rate. From Years 4–30 the payment settles at $2,544.14 — the full note-rate payment.
How buydowns work
A temporary subsidy, not a lower rate
A buydown sets aside funds in an escrow account. Each month the lender draws from it to cover the gap between your note rate and the reduced rate for that year. When the funds run out, you pay the full note rate.
3-2-1 buydown
- Year 1
- Note rate − 3 points
- Year 2
- Note rate − 2 points
- Year 3
- Note rate − 1 point
- Years 4–30
- Full note rate
The deepest discount for three years, then the full note rate in year 4.
2-1 buydown
- Year 1
- Note rate − 2 points
- Year 2
- Note rate − 1 point
- Years 3–30
- Full note rate
A shorter, cheaper-to-fund discount with a smaller step up at the end.
Your note rate never changes. Both programs subsidize payments for a limited period. The final step is the number to plan your budget around — not the year-1 payment.
Comparison
3-2-1 vs. 2-1, side by side
Example: $400,000 at a 7.00% note rate, 30-year term, principal and interest only. Change the inputs above to see your own numbers.
Illustrative only, calculated from the amortization schedule. A 2-1 loan settled at the note rate from year 3 has a slightly higher final payment than a 3-2-1 because it received less subsidized amortization. Your lender's figures depend on the program, the subsidy and your note rate.
Who pays for it
Where the subsidy comes from
A buydown isn't free money — someone funds the temporary discount. Knowing who, and what happens to unused funds, is the important part.
Seller or builder funded
The most common arrangement. The subsidy is agreed in the purchase contract and held by the lender — often at no direct out-of-pocket cost to the buyer.
Buyer funded
You can pay for all or part of the buydown in cash at closing. A 2-1 typically costs less to fund than a 3-2-1 because it covers one fewer year.
Contribution limits
Loan programs cap seller contributions as a percentage of the price, and a buydown may count against that limit. Your loan officer can confirm what your offer can include.
Unused funds
If you sell or refinance early, the subsidy remaining in the account is typically credited toward payoff or returned to its source. Ask for the buydown agreement in writing.
Who each fits
Choosing between the two
Both lower early payments. The difference is how much you save, how long it lasts, and how much the subsidy costs.
A 3-2-1 suits you if
- Your income is expected to rise over the next three years
- You want the largest possible saving while cash is tight
- A seller or builder is offering a substantial concession
- You're buying new construction where 3-2-1 offers are common
- You can comfortably handle the year-4 payment
A 2-1 suits you if
- You want relief now but a smaller step up at the end
- The available concession is smaller
- You plan to sell or refinance within about three years
- You're uncomfortable committing to a large year-4 jump
- Your income increase is more gradual
Think twice if your income is flat, or if the step-up payment would strain your budget.
Apply NowFrequently asked questions
What buyers ask us most about buydown programs.
Written by
Saman KhanianMortgage professional at Equitable Lending, helping buyers compare loan structures and buydown programs across Los Angeles and nationwide.
Want to know if a buydown fits your purchase?
Tell us the price, your down payment and the note rate you're being offered. We'll run the 3-2-1 and 2-1 against your numbers — and against a plain rate reduction — so you can compare like for like.
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