Mortgage Rate Buydown Calculator: 2-1, 3-2-1 and Permanent
Most of the builder offers I'm tracking across Williamson and Maury counties right now, in Franklin, Thompson's Station, Spring Hill, College Grove and Columbia, are rate buydowns. A 2.99% first year sounds like a different market, and the fine print says what it really is: a 2-1 buydown on a loan that stays at 4.99% for 28 of its 30 years. This calculator shows what a buydown does to your payment year by year, what it costs whoever's paying for it, and what that same money would do as discount points or a straight price cut. Run it before you sign, because the offer sheet only shows you year one.
Run your numbers
The loan
The buydown
Compare: the same money as points
Temporary buydown, year by year
| Period | Payment | Discount |
|---|---|---|
| Total buydown cost (escrowed at closing) | $0 | |
The same $0 as a permanent buydown (discount points)
| Points that money buys | 0 |
| Permanent rate | 0% |
| Payment for the life of the loan | $0 |
| Savings vs the full payment | $0 |
| Break-even on the points | n/a |
| Interest saved over the full term | $0 |
The same money as a price cut
| Loan amount after the cut | $0 |
| Payment at the full rate (0%) | $0 |
| Savings vs the full payment of $0 | $0 |
This is an estimate, not a loan quote, and not an offer to lend. I'm a real estate agent, not a lender; rates, points and builder incentives change daily and are set by the lender and the builder, not by me. Payments are principal and interest only; taxes, insurance, HOA and mortgage insurance come on top. You qualify at the full note rate, not the bought-down rate, on conventional, FHA and VA loans. Lenders price temporary buydowns and discount points differently from the straight payment-difference math used here, and the rate drop per point changes with the market, so get the buydown agreement and a Loan Estimate from the lender before you count on any number on this page.
Want me to read a builder's offer sheet against these numbers? Call or text 615-392-1186. It's free and there's no obligation.
How a rate buydown works
Temporary buydown
Your loan's note rate doesn't change. Someone prepays the difference between the full payment and a discounted one into an escrow account, and the lender draws from it every month. A 2-1 buydown is 2% off the rate in year one and 1% off in year two. A 1-0 is one year at 1% off. A 3-2-1 runs three years. After that you pay the full note-rate payment for the rest of the term.
What it costs
Add up the monthly discounts. On a 2-1 that's twelve months of the year-one savings plus twelve months of the year-two savings. That sum is what goes into escrow, and it's the number this calculator shows. Lenders sometimes price it differently, so the buydown agreement is the final word.
Who pays
Right now it's mostly builders, through their own mortgage companies, as a concession in place of a price cut. Sellers of resale homes can do it too. A lender can fund it through pricing, which usually means a higher note rate. You can pay for your own, but at that point compare it with points.
Permanent buydown, or points
One discount point costs 1% of the loan amount and lowers the rate for the life of the loan. How much it lowers it changes by lender and by day. Around a quarter of a percent per point is common, but ask. Divide the cost by the monthly savings and you get the break-even, the month the points start paying for themselves.
The concession caps
A builder-paid or seller-paid buydown counts against the seller contribution limit. Conventional loans allow 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% with 25% or more. FHA and USDA allow 6%. VA allows 4% for concessions on top of the normal closing costs a seller can pay. Go over the cap and the lender treats the excess as a price reduction instead.
You still qualify at the full rate
Fannie Mae, FHA and VA all require the lender to qualify you at the note rate, not the bought-down rate. The buydown lowers your payment for a year or three. It doesn't lower the loan you have to qualify for.
What moves the number most
The note rate and the loan amount, then the question nobody on the sales floor asks: would the same money do more as a price cut? A price cut lowers your loan balance and your payment for the whole term, and nothing jumps when year three arrives. A buydown front-loads the savings into the years you're most likely to refinance or move. The calculator shows both from the same dollars. Pick the one that fits how long you'll keep the loan. And if a low payment is the whole point, look at an assumable mortgage too, where the low rate is permanent.
A real example from a Columbia builder, October 2026
One builder in Columbia is advertising 2.99% the first year on select homes through its own mortgage company. Their published example: a $300,000 price, a 30-year fixed FHA loan of $294,566 at 4.99% with zero points. The payment is $1,240.31 at 2.99% in year one, $1,404.61 at 3.99% in year two, then $1,579.49 for years three through thirty. Their disclosed APR is 5.750%, as of October 2, 2026, and their fine print says the payments exclude mortgage insurance, taxes and homeowners insurance. That's $339.18 a month off in year one and $174.88 in year two, or $6,169 in total by the payment-difference math this calculator uses. Their disclosure lists a $3,500 seller contribution to pay for the buydown, which means the lender is pricing it differently from the straight math. That gap is exactly why you get the buydown agreement and a Loan Estimate in writing before you count on anything. One more line from their fine print: one incentive per home, financing through their lender. Text me and I'll tell you which builder, which homes, and what else is on the table. The offers I'm tracking change weekly, so I keep them off the page and send them by text.
Disclosure
Nothing on this page is an offer to lend, a rate quote, an advertisement of credit terms, or a commitment of any kind. I am a licensed real estate agent, not a mortgage lender or broker, and I do not originate loans. The rates, payments, APRs and builder incentives described here were published by the builder or its lender on the dates stated and change without notice. Builder offers can be withdrawn at any time, are typically limited to select homes and contract dates, and are often conditioned on financing through the builder's affiliated lender. Payment figures from the calculator are principal-and-interest estimates based only on what you enter and exclude property taxes, homeowners insurance, HOA dues and mortgage insurance. Loan qualification, interest rates, discount point pricing and temporary buydown pricing are set by the lender under its own guidelines and the applicable Fannie Mae, FHA, VA and USDA rules, which also change. Get a written Loan Estimate and buydown agreement from a licensed lender before relying on any number on this page. Kimo Quance, Affiliate Broker, eXp Realty, Tennessee license 369038. Equal Housing Opportunity.
Common questions about rate buydowns
What is a 2-1 buydown?
A temporary rate buydown that cuts your interest rate by 2% in the first year and 1% in the second, then returns to the full note rate from year three on. The loan itself is a normal fixed-rate mortgage. The discount is prepaid into an escrow account.
How much does a 2-1 buydown cost?
The twelve months of year-one savings plus the twelve months of year-two savings. On a $294,566 loan at 4.99%, that's about $6,169. The bigger the loan and the higher the rate, the more it costs, which is why it's usually a builder paying for it.
Who pays for a rate buydown?
Usually the builder or seller, as a concession. Sometimes the lender, through pricing. Occasionally the buyer. If the seller pays, it counts against the seller concession cap for your loan type.
Do I qualify at the bought-down rate?
No. Conventional, FHA and VA lenders qualify you at the full note rate. The buydown changes your payment, not your approval.
Is a buydown better than a price cut?
It depends on how long you keep the loan. A price cut lowers the balance and the payment for the whole term. A buydown gives you more relief in the first one to three years and nothing after. If you expect to refinance or sell inside three years, the buydown often wins. If you're staying, run the price cut. The calculator shows both from the same dollars.
What is a permanent buydown?
Discount points. One point is 1% of the loan amount, paid at closing in exchange for a lower rate for the life of the loan. The rate drop per point varies by lender and by day, so get it quoted. Break-even is the cost divided by the monthly savings.
What happens to the buydown money if I sell or refinance early?
On a conventional loan the remaining escrow is credited toward the payoff, or returned to the borrower or the lender as the buydown agreement says. On a VA loan it's credited against the loan balance. If the loan is assumed, the buydown keeps running for the new owner. Read the agreement before closing.
Can I use a 2-1 buydown on an FHA or VA loan in Tennessee?
Yes, on fixed-rate loans. FHA counts a seller-paid buydown inside the 6% contribution limit. VA counts it against the 4% concession limit and requires the funds in a separate escrow. Lenders underwrite at the note rate on both.
Selling a house to buy the new one? Run the other side on my Tennessee home sale calculator.
Shopping new construction in Spring Hill? Every builder and this week's offers are on my Spring Hill new construction page.
Got a builder's offer sheet in hand?
Send me a photo of it and I'll run it against a price cut and today's rate, free, usually the same day.