The Mortgage Sensei

The Mortgage Sensei
Virginia mortgage tools

Virginia Rate Buydown Calculator

Compare a temporary 2-1, 3-2-1 or 1-0 buydown with permanent discount points. See the payments, the cost and the break-even.

Buydown type

Loan details

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A sample rate for illustration. Use a rate you have been quoted.

Loan term

Temporary buydown

Structure

Who pays

Temporary buydowns are usually paid for as a concession, not by the buyer. Concession limits depend on the loan program.

Run your numbers

Year 1 savings

$0

Year 1 payment
$0
Full-rate payment
$0
Total subsidy cost
$0
Your cost
$0
YearRateP&I per monthSaved per year

Principal and interest only. Taxes, insurance, mortgage insurance and HOA are not included. Buydown availability, pricing and limits depend on the lender, loan program and the day.

Temporary or permanent

Both lower a payment, but they are built for different situations.

  • Temporary (2-1, 3-2-1, 1-0). Lowers the rate for the first one to three years, then returns to the full note rate. The cost is funded up front and applied as a monthly subsidy. It is usually a seller, builder or lender concession.
  • Permanent (discount points). You pay a percentage of the loan up front to lower the rate for the whole loan. It only pays off if you keep the loan past break-even.
  • A temporary buydown helps when someone else pays, you expect income to grow, or you may refinance soon. Unused subsidy is typically credited to your refinance costs or principal.
  • Points help when you plan to keep the loan a long time and have cash to spare after reserves.
  • Not covered. Lender-paid options in exchange for a higher rate, program-specific rules and tax treatment. Ask a tax professional about points.

Buydown FAQ

What is a 2-1 buydown?

The rate is 2% lower in year 1 and 1% lower in year 2, then it returns to the note rate for the rest of the loan. The cost sits in escrow and subsidizes the payments.

What does a 3-2-1 cost?

It is the sum of the payment differences across the three years, which this tool shows as the total subsidy cost. It scales with the loan size and the rate, which is why it is usually funded as a concession.

What if I refinance during the buydown?

Unused buydown funds are typically credited toward closing costs or principal. Confirm how it works for your loan.

How much does a point lower the rate?

A common rule of thumb is about 0.25%, but it changes by lender, program and day. Compare the same lender's no-point rate with the bought-down rate.

Are points tax deductible?

Points on a primary residence purchase are generally deductible in the year paid, and refinance points are usually spread over the loan. Rules have conditions, so ask a tax professional.