Mortgage Rate Buydown Explained: 2-1 and 3-2-1 Temporary Buydowns
Temporary buydowns (2-1, 3-2-1) vs permanent buydowns with points: how each works, who pays, what happens after the subsidized years, and when a buydown beats a lower price.
By The RateFig Editorial Team · July 30, 2026 · reviewed against official mortgage and rate sources
A buydown lowers your mortgage rate — either for the life of the loan or just for the first few years. Buyers meet two versions: the permanent buydown (via discount points) and the temporary buydown (a 2-1 or 3-2-1 structure). The temporary kind is often paid by a seller or builder to make a home more affordable early on.
Temporary Buydowns: 2-1 and 3-2-1
These subsidize your rate for a fixed number of years using money collected at closing.
- 2-1 buydown: rate is 2 points below the note rate in year 1, 1 point below in year 2, then the full note rate from year 3 on.
- 3-2-1 buydown: 3 points below in year 1, 2 below in year 2, 1 below in year 3, then the full rate.
Example: 2-1 buydown on a $300,000 loan at a 6.50% note rate
| Year | Effective rate | Monthly P&I (approx.) | Subsidy | |------|----------------|------------------------|---------| | 1 | 4.50% | ~$1,520 | ~$376/mo | | 2 | 5.50% | ~$1,703 | ~$193/mo | | 3+ | 6.50% | ~$1,896 | $0 |
The ~$569 per month of year-one subsidy is drawn from the buydown account funded at closing. After year two, you pay the full note-rate payment.
Permanent Buydown With Points
Paying discount points lowers the rate for the entire loan. One point (1% of the loan) typically buys about 0.25 points of rate. Unlike a temporary buydown, there is no reversion — but the cost is only worth it if you keep the loan past the break-even point.
Temporary vs Permanent: Which Fits?
| Goal | Better choice | |------|---------------| | Need lower payments only while ramping up career / post-move | Temporary buydown | | Plan to stay long and want a permanently lower rate | Points (permanent) | | Seller will help but will not drop price | Seller-paid temporary buydown | | Expect to refinance within 2–3 years | Temporary buydown (you may not reach points break-even) |
The Reversion Is the Catch
A temporary buydown does not change your note rate; it postpones the full payment. If your budget only works at the year-one payment, the year-three jump can be a shock. Plan for the reverted payment from the start, and treat the early discount as breathing room, not a permanent fix.
Buydown vs Price Reduction
A seller can either cut the price or pay for a buydown. For a buyer who will refinance or move soon, a buydown can beat a price cut because the savings are immediate and the seller's concession is leveraged through financing. For a long-term owner, a lower price builds more equity. The right call depends on your time horizon.
The Practical Check
Ask for both the note-rate payment and the buydown-year payments in writing, and confirm who funds the buydown and what happens to any unused balance if you refinance or sell. Run the reverted payment in the calculator to be sure you can carry it before you rely on the discount.
All calculations are approximate for planning purposes only. This article does not provide official financial, legal, or tax advice. Verify any decision with a qualified mortgage lender or financial advisor.
Frequently Asked Questions
What is a 2-1 buydown?+
A temporary buydown that reduces your rate by 2 points in year one and 1 point in year two, then reverts to the full note rate in year three. The discount is funded upfront, often by the seller or builder.
Who pays for a buydown?+
Anyone can, but in purchase deals the seller or builder often pays it as a concession instead of dropping the price. The cost is collected at closing and held to subsidize the early payments.
Is a buydown the same as buying discount points?+
Not exactly. Discount points permanently lower the rate for the life of the loan. A temporary buydown lowers it only for the first few years, then the rate returns to the note rate.
Where can I compare the payments?+
Use the free calculator at /tools/mortgage-calculator/. It runs the same US-standard formula in real time, no signup required, so you can test the subsidized and reverted payments side by side.
Run the Numbers Yourself
Reading is the first step. The next is plugging your own numbers into a calculator that runs the same US-standard formulas in real time — no signup, no paywall, instant results.
Open the calculator→Key Takeaways
Use the calculator linked above to confirm how these concepts apply to your specific loan amount, rate, and term. Small changes in any one input can shift your monthly payment and total interest by thousands of dollars over the life of the loan.