See exactly what a 2/1 or 3/2/1 temporary buydown saves you each year — and what the seller or builder has to deposit at closing to make it work.
Some builders pad their price to cover the buydown. I can run the numbers on any Austin new construction offer and tell you if the concession is real or cosmetic.
A seller or builder concession that temporarily reduces your rate for two years. Year 1: rate is 2% below note rate. Year 2: rate is 1% below. Year 3+: full note rate. The seller deposits the total payment difference into escrow at closing. It does not affect your permanent rate.
On a $460,000 loan at 7%, a 2-1 buydown runs approximately $11,000-$13,000 in total subsidy. Year 1 savings (at 5%) are about $660/month; Year 2 (at 6%) about $320/month. The exact cost scales with loan size and rate. Enter your numbers above to see the exact amount for your scenario.
Yes. Many Austin builders — particularly in northern and southeastern suburban communities — continued offering 2-1 buydowns through 2025-2026 to move inventory. Common areas include Kyle, Buda, Pflugerville, Hutto, and Leander. Availability varies by builder and sales pace. I track current incentives — reach out for the latest.
A lower price permanently reduces your payment, loan balance, and total interest. A buydown gives short-term relief but you pay the full rate from year 3 on. If you plan to refinance when rates drop, a buydown bridges the gap. If you plan to hold long-term without refinancing, a lower price usually wins. Always ask the builder for the equivalent price reduction.
Rate is reduced 3% in year 1, 2% in year 2, 1% in year 3, then returns to the note rate in year 4. Costs more than a 2-1 but provides bigger relief in year 1. More common on higher-priced homes and in markets where builders have significant inventory pressure.
Yes. FHA allows seller-funded temporary buydowns. The buyer cannot fund their own buydown with FHA. You still qualify at the note rate (not the buydown rate) — lenders use the full payment for DTI purposes. The buydown is separate from any seller credit toward closing costs.
The remaining buydown subsidy in escrow does not transfer to a refinanced loan. But if rates have dropped enough to justify refinancing, you come out ahead overall — you got reduced payments in years 1-2 and now you get a permanently lower rate. Refinancing early from a buydown is often a good outcome.
At rates in the 6.75-7.25% range, buydowns make sense if the seller or builder funds the cost and you plan to sell or refinance within 3-5 years. They provide real cash flow relief in years 1-2. If you plan to hold without ever refinancing, the long-term math is the same as having the note rate from day one.
Frame it as a seller credit at closing — the seller credits you cash, which funds the buydown escrow. This works on resale homes too, not just new construction. I negotiate these for clients regularly. The key is knowing the builder's current incentive budget, which I can find out for any Austin-area community.
No. Buying points permanently reduces your rate for the life of the loan. A buydown is temporary — it expires after 1-3 years. Points are paid by the borrower; buydowns are funded by the seller or builder. Both appear at closing, but they work very differently.
The buydown subsidy is calculated as the sum of monthly payment differences between the reduced rate and the note rate, over each year of the buydown period. For a 2-1 buydown: Year 1 subsidy = 12 × (note rate P&I − Year 1 reduced rate P&I). Year 2 subsidy = 12 × (note rate P&I − Year 2 reduced rate P&I). Total subsidy = Year 1 + Year 2.
All payments use the standard 30-year amortization formula applied to the loan amount. The reduced rate is simply the note rate minus the reduction for each year. This matches how lenders calculate the escrow requirement at closing.
This calculator is for educational purposes. Actual subsidy amounts are determined by your lender. Last updated July 2026.
