Free tool
Rate buy-down calculator
Should the seller's money go to a 2-1 buy-down or to permanent points? See what each costs, what it saves each year, and when points pay for themselves.
Temporary buy-down
$6,361 subsidy, usually paid by the seller
Assumes a $300,000 price, 10% down, 30-year fixed rate at 7.24% (APR 7.24%). Principal and interest only; taxes, insurance, and mortgage insurance not included. APR assumed equal to the rate; actual APR will be higher with lender fees. Estimate only. Not a loan offer or commitment.
| Year | Rate | P&I payment | Saved per month |
|---|---|---|---|
| 1 | 5.24% | $1,489 | $351 |
| 2 | 6.24% | $1,661 | $179 |
| After | 7.24% | $1,840 | $0 |
The seller's money sits in an account that tops up your payment for the first years. After that you pay the full note rate. Lenders typically underwrite the loan at the full note rate.
Permanent discount points
The same seller money, spent on points instead
$6,361 buys about 2.36 points: 6.65% for the life of the loan, saving $107 a month. Its savings pass the temporary buy-down's after 60 months (5 years).
Principal and interest only. A 2-1 buy-down's subsidy equals the payment difference for each reduced year. Points may be tax-deductible; ask a tax professional. Seller concessions are capped by loan program.