3-2-1, 2-1, 1-1, 1-0 and seller-paid
Buydowns & Seller Credits
Temporary buydown subsidy cost and a comparison of seller credits used as a buydown, a permanent buydown, or a price cut.
Seller-paid concessions
Market pricing ratio
2-1 buydown cost
$9,906.60
Funded into escrow at closing
Year 1 payment
$2,262.37
at 4.875%
Full note payment
$2,808.37
at 6.875% from year 3
2-1 schedule
| Year | Rate | P&I | Monthly subsidy | Annual subsidy |
|---|---|---|---|---|
| 1 | 4.875% | $2,262.37 | $546.00 | $6,552.00 |
| 2 | 5.875% | $2,528.82 | $279.55 | $3,354.60 |
| 3+ | 6.875% | $2,808.37 | — | — |
Borrowers qualify at the full note rate. Unused buydown funds are typically applied to principal on payoff or refinance, per the buydown agreement.
Best use of the seller's $15,000
2-1 temporary buydown
- Year-1 P&I
- $2,262.37
- Year-3 P&I
- $2,808.37
- Rate
- 6.875%
- Cost over 5 yr
- $560,466
Costs $9,906.60; $3,593.40 of the credit remains for closing costs.
Permanent rate buydown
- Year-1 P&I
- $2,630.25
- Year-3 P&I
- $2,630.25
- Rate
- 6.243%
- Cost over 5 yr
- $556,798
Buys ~3.16 points at 5 points per 1.00% of rate.
Price reduction Lowest cost
- Year-1 P&I
- $2,724.12
- Year-3 P&I
- $2,724.12
- Rate
- 6.875%
- Cost over 5 yr
- $552,586
Lowers loan amount, down payment and property-tax basis.
Cost = payments over the period + remaining balance (+ down-payment difference for a price cut). Permanent buydown pricing uses the points-per-1% ratio above; get live pricing before advising a client.