How much does a 3-2-1 buydown cost?
On a $500,000 loan at 6.5% over 30 years, a 3-2-1 buydown costs about $22,361, funded into an escrow account at closing and usually paid by the seller. It cuts your rate by three points in year one, two in year two and one in year three, then the note rate applies. That is roughly $10,981 more than a 2-1 on the same loan.
Every figure on this page is arithmetic on the numbers stated, produced by the same formula behind our payment calculator. It is not a quote and not an offer of credit.
What it costs, by loan size
A 6.5% note rate on a 30-year fixed loan. The cost is the total of the payments the escrow covers, so it moves with the loan amount and with the rate.
| Loan amount | Year 1 (3.5%) | Year 2 (4.5%) | Year 3 (5.5%) | Year 4+ (6.5%) | Buydown cost |
|---|---|---|---|---|---|
| $400,000 | $1,796/mo | $2,027/mo | $2,271/mo | $2,528/mo | $17,889 |
| $500,000 | $2,245/mo | $2,533/mo | $2,839/mo | $3,160/mo | $22,361 |
| $600,000 | $2,694/mo | $3,040/mo | $3,407/mo | $3,792/mo | $26,833 |
The part most pages leave out
A 3-2-1 buys a first-year payment of $2,245 on this loan, against $3,160 at the note rate. That gap is the appeal and it is also the risk: a lender underwrites you at 6.5%, not at 3.5%, so the low payment does not increase what you qualify for and it is not meant to. If the payment in year four would not be comfortable, the buydown has not solved anything, it has postponed it by three years.
3-2-1 buydowns, answered
How much does a 3-2-1 buydown cost?
On a $500,000 loan at 6.5% over 30 years, a 3-2-1 buydown costs about $22,361, deposited into escrow at closing. It runs roughly $17,889 on $400,000 and $26,833 on $600,000 at the same rate. It costs about $10,981 more than a 2-1 on the same loan, because it covers a third year and cuts the first year deeper.
What is the difference between a 3-2-1 and a 2-1 buydown?
A 3-2-1 cuts the rate by three points in year one, two in year two and one in year three. A 2-1 cuts by two and then one, over two years. On a $500,000 loan at 6.5% that is $22,361 against $11,380 — the 3-2-1 asks the seller for roughly 2 times as much.
Will a 3-2-1 buydown help me qualify for a bigger loan?
No. A lender underwrites the loan at the note rate, not the bought-down rate, so the low first-year payment does not change what you qualify for. That is deliberate: the point of the rule is that you should be able to afford the payment that arrives once the escrow runs out. Treat a buydown as a way to ease the first years, never as a way to reach a house you could not otherwise be approved for.
Is a seller likely to agree to a 3-2-1?
It is a large concession, so it depends on the market and on what else the offer is asking for. In practice a seller weighs the total concession against other offers rather than the label on it, and the same dollars can be spent on a permanent rate reduction, closing costs, or price. It is worth having a loan officer price all of those against the identical amount before deciding which to ask for.
Worth asking for, or worth asking for something else?
The same concession can buy a permanent rate reduction, closing costs, or price. A loan officer can price all of them against the identical dollar amount.
Figures on this page are estimates computed from the amounts, rates and terms stated, for information only. They are not a quote, an offer, or a commitment to lend or extend credit. Your rate is set at approval and your payment depends on credit approval, underwriting, the property, taxes, insurance and any HOA obligation. All loans subject to credit approval. Vanna Lending, LLC dba Blue Pebble Loans, NMLS #2447767, licensed in CO, CA, NM, FL, & TX. Equal Housing Opportunity.