Worked Example

Illustrative example only—not a rate quote.

For a $400,000, 30-year mortgage with a 6.50% note rate, the estimated principal-and-interest payment is approximately $2,528. With an illustrative 2-1 temporary buydown:

• Year 1 payment, calculated at 4.50%: approximately $2,027
• Year 2 payment, calculated at 5.50%: approximately $2,271
• Year 3 and after, at the 6.50% note rate: approximately $2,528
• Estimated total subsidy needed: approximately $9,104

Actual program eligibility, funding and qualification requirements vary. Borrowers should be prepared for the full note-rate payment.

1-0 Temporary Rate Buydown Example

On a hypothetical $400,000, 30-year fixed loan with a 6.50% note rate, the full monthly principal-and-interest payment is $2,528.27. A 1-0 Temporary Rate Buydown reduces the buyer's payment to $2,271.16 for the first 12 months—about $257 less per month. The full payment begins in year 2.

Estimated upfront subsidy: approximately $3,085.

3-2-1 Temporary Rate Buydown Example

Using the same hypothetical $400,000 loan, 30-year term and 6.50% note rate:

• Year 1: $1,796.18 monthly principal and interest—about $732 less per month.
• Year 2: $2,026.74—about $502 less per month.
• Year 3: $2,271.16—about $257 less per month.
• Year 4 onward: the full $2,528.27 monthly principal-and-interest payment.

Estimated upfront subsidy: approximately $17,889.

These examples are illustrations, not current rate quotes. Payments exclude taxes, homeowners insurance, mortgage insurance, HOA dues and fees. Subsidy estimates are rounded. The contractual note rate does not change, and eligibility and permitted funding sources vary by lender and loan program.