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Permanent vs. Temporary Buydowns Guide

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Permanent vs. Temporary Mortgage Rate Buydowns: Which strategy could save more money? A practical guide for Realtors and homebuyers by Kurt Kessler

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High Rates Create Opportunity

Temporary Buydown vs Price Reduction

Permanent Buydown vs Price Reduction

How to use the Calculator

Temporary Mortgage Rate Buydown Calculator

Principal and interest only

Loan details

Sales price

Down payment percentage

Loan amount and down payment percentage update each other automatically.

Loan amount

Loan term

Note interest rate

Enter up to three decimal places.

Temporary buydown option

Regular monthly P&I

$4,424.48

Mortgage payment only. No taxes, insurance, HOA dues, or mortgage insurance.

First year payment

$3,546.80

Mortgage payment only. No taxes, insurance, HOA dues, or mortgage insurance.

First year monthly savings

$877.68

Total temporary buydown cost

$15,931.59

Cost as % of loan amount

2.276%

Cost as % of purchase price

1.821%

Equivalent price reduction needed

Price reduction required to match the first year payment at the full note rate, assuming the same down payment percentage.

Price reduction

$173,572.89

New price

$701,427.11

Monthly payment comparison

Lower bars show lower principal and interest payments.Mortgage payment only. No taxes, insurance, HOA dues, or mortgage insurance.

$3,546.80

Year 1 · 4.500%

$3,974.52

Year 2 · 5.500%

$4,424.48

Regular · 6.500%

Payment schedule and estimated cost

2/1 Buydown

Payment period	Effective rate	Bought down payment	Regular payment	Monthly savings	Months	Period cost
Year 1	4.500%	$3,546.80	$4,424.48	$877.68	12	$10,532.15
Year 2	5.500%	$3,974.52	$4,424.48	$449.95	12	$5,399.44
Year 3 and beyond	6.500%	$4,424.48	$4,424.48	$0.00	336	$0.00

Seller Concession Cheat Sheet

How much a seller may contribute toward closing costs, based on loan program, property type, and down payment.

Loan type	Property type	Down payment	Contribution type	Max contribution
Conventional	Primary or secondary home	Less than 10%	Closing costs, prepaid items, and discount points	3%
Conventional	Primary or secondary home	10% to 25%	Closing costs, prepaid items, and discount points	6%
Conventional	Primary or secondary home	More than 25%	Closing costs, prepaid items, and discount points	9%
Conventional	Investment	15% or more	Closing costs, prepaid items, and discount points	2%
FHA	Primary	3.5% or more	Closing costs, prepaid items, and discount points	6%
VA	Primary	Not applicable	Closing costs, prepaid items, and discount points	Unlimited, up to 2 discount points
VA	Primary	Not applicable	May include debt payoff	4%

Reference guide only. Seller contribution limits and eligible costs may vary by program, transaction, and investor requirements. Confirm current guidelines before structuring an offer.

This calculator is provided for educational and illustrative purposes only. Results are estimates and include principal and interest payments only. A temporary buydown does not change the loan's note rate. The funds used to subsidize the temporarily reduced payments are generally collected at closing. Program availability, contribution limits, qualification requirements, and actual costs may vary. This calculator does not constitute a loan approval, commitment to lend, or interest rate quote.

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Real Guidance Behind the Calculators

Calculators can explore possibilities, but they cannot evaluate every guideline, property, credit profile, or financial goal.

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