Rate Buydowns: Temporary (2-1) and Permanent
How temporary 2-1 and 1-0 buydowns and permanent discount points lower a mortgage rate, what they cost, who can pay for them, and how to judge whether they pay off.
Conventional benchmark: Freddie Mac weekly survey
Week of August 20, 2026Source: Freddie Mac Primary Mortgage Market Survey via FRED, updated August 20, 2026. National average survey rates, not an offer. Your rate will depend on credit score, loan-to-value, loan type, property and occupancy. Rates could change or not be available at commitment or closing. This product uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis.
How Rate Buydowns: Temporary (2-1) and Permanent pricing relates to this benchmark. A buydown does not change the benchmark; it changes what you pay for a rate. A permanent buydown uses points to move below the survey figure above, and a temporary 2-1 buydown leaves the note rate where it is and prepays part of the first two years of interest.
How Rate Buydowns: Temporary (2-1) and Permanent are set
A buydown lowers the interest rate on a mortgage in exchange for money paid at closing. There are two very different kinds. A permanent buydown, purchased with discount points, lowers the note rate for the entire loan term. A temporary buydown, such as a 2-1 buydown, lowers the effective payment for the first one to three years by drawing on a prepaid escrow account, after which the payment reverts to the full note rate.
In a 2-1 buydown, the borrower pays as if the rate were 2 percentage points lower in year one and 1 point lower in year two, then the full note rate from year three on. The cost is the exact difference in payments over those two years, deposited into an escrow account at closing. Because the cost equals the subsidy, a temporary buydown is not a discount so much as a prepayment, and it is almost always funded by the seller or builder as a concession rather than by the buyer.
Discount points work differently. One point equals 1 percent of the loan amount, and the rate reduction it buys varies daily with the market, typically somewhere between 0.125 and 0.375 percentage points per point. The break-even is the cost of the points divided by the monthly savings. If you expect to keep the loan well beyond that break-even, points can pay off; if you expect to refinance or sell sooner, they often do not.
Borrowers qualify at the full note rate on both types, so a temporary buydown does not increase the loan amount you can be approved for. Seller concessions are capped by program: conventional loans allow 3 to 9 percent of the price depending on the down payment, FHA allows 6 percent and VA allows 4 percent plus certain closing costs. A buydown competes with other concessions such as closing-cost credits within those caps.
A seller or builder credit can often be applied to a permanent buydown instead of a temporary one. Comparing the two, along with a straight price reduction, is worth doing before you finalize a contract. Use the buydown calculator on this site to see the escrow cost of a 2-1 structure for your loan amount and rate.
Rates shown could change or may not be available at commitment or closing.
Daily rate-lock index (OBMMI)
Updated daily by providerIndex data © Optimal Blue, LLC. Optimal Blue Mortgage Market Indices.
Source: Optimal Blue Mortgage Market Indices (OBMMI), updated August 26, 2026. National average survey rates, not an offer. Your rate will depend on credit score, loan-to-value, loan type, property and occupancy. Rates could change or not be available at commitment or closing.
Rate Buydowns: Temporary (2-1) and Permanent: common questions
How much does a 2-1 buydown cost?
The cost equals the total payment savings over the first two years. On a $400,000 loan at 6.5 percent, the escrow deposit is roughly $9,000 to $10,000. The calculator on this site gives an exact figure.
Can the buyer pay for a temporary buydown?
Some programs allow it, but because the cost equals the subsidy, buyers usually get more value from discount points or a larger down payment. Sellers and builders fund most temporary buydowns.
What happens to the buydown escrow if I refinance early?
Any unused funds in the buydown account are typically applied to the loan balance at payoff. Confirm the terms in your buydown agreement.
How much does one discount point lower the rate?
It changes daily. A common range is 0.125 to 0.375 percentage points per point, with the rate reduction per point shrinking as you buy more.