2/1 Buydown Calculator

Use our best 2/1 Buydown Calculator that is both and basic and advanced mode. Enter data, principal loan amount, Interest rate for first period, Number of monthly Payments for first period, Interest rate for second period, monthly payment etc. to calculate the 2/1 buydown

Enter any 4 values to calculate the missing variable

Principal Loan Amount Interest Rate for First Period (as a decimal, e.g., 0.05 for 5%) Number of Monthly Payments for First Period Interest Rate for Second Period (as a decimal, e.g., 0.05 for 5%) Number of Monthly Payments for Second Period Monthly Payment

Formula:

Contents

1 Formula:
2 Solved Examples:
3 What is 2/1 Buydown Calculator?

$MP = \frac{(P \times r1 \times (1 + r1)^{n1}) + (P \times r2 \times (1 + r2)^{n2})}{((1 + r1)^{n1} + (1 + r2)^{n2}) – 1$

Variables:

Variable	Meaning
MP	Monthly Payment
P	Loan Principal (Amount Borrowed)
r1	Interest Rate during the First Period
n1	Number of Payments during the First Period
r2	Interest Rate during the Second Period
n2	Number of Payments during the Second Period

Solved Examples:

Example 1:

Given:

Loan Principal (P) = $200,000
Interest Rate during the First Period (r1) = 3% (or 0.03)
Number of Payments during the First Period (n1) = 12 months (1 year)
Interest Rate during the Second Period (r2) = 4% (or 0.04)
Number of Payments during the Second Period (n2) = 12 months (1 year)

Calculation	Instructions
Step 1: Substitute values into the formula:	Start with the formula.
$MP = \frac{(200,000 \times 0.03 \times (1 + 0.03)^{12}) + (200,000 \times 0.04 \times (1 + 0.04)^{12})}{((1 + 0.03)^{12} + (1 + 0.04)^{12}) – 1}$	Replace the variables with the given values.
Step 2: Calculate the numerator:	Compute the top part of the equation.
Numerator ≈ $200,000 \times 0.03 \times 1.42576 + 200,000 \times 0.04 \times 1.60103$	Compute the results of the exponentiated terms.
Numerator ≈ $8,554.56 + 12,808.24$	Multiply and add the terms.
Numerator ≈ 21,362.80	Result of the numerator.
Step 3: Calculate the denominator:	Compute the bottom part of the equation.
Denominator ≈ $(1.42576 + 1.60103) – 1$	Compute the sum of the exponentiated terms minus 1.
Denominator ≈ 2.02679	Result of the denominator.
Step 4: Divide the numerator by the denominator:	Compute the final division to get the monthly payment.
MP ≈ $\frac{21,362.80}{2.02679}$	Divide the numerator by the denominator.
MP ≈ $10,542.89	The final monthly payment.

Answer: The monthly payment is approximately $10,542.89.

Example 2:

Given:

Loan Principal (P) = $150,000
Interest Rate during the First Period (r1) = 2.5% (or 0.025)
Number of Payments during the First Period (n1) = 12 months (1 year)
Interest Rate during the Second Period (r2) = 3.5% (or 0.035)
Number of Payments during the Second Period (n2) = 12 months (1 year)

Calculation	Instructions
Step 1: Substitute values into the formula:	Start with the formula.
$MP = \frac{(150,000 \times 0.025 \times (1 + 0.025)^{12}) + (150,000 \times 0.035 \times (1 + 0.035)^{12})}{((1 + 0.025)^{12} + (1 + 0.035)^{12}) – 1}$	Replace the variables with the given values.
Step 2: Calculate the numerator:	Compute the top part of the equation.
Numerator ≈ $150,000 \times 0.025 \times 1.34489 + 150,000 \times 0.035 \times 1.51071$	Compute the results of the exponentiated terms.
Numerator ≈ $5,048.34 + 7,944.90$	Multiply and add the terms.
Numerator ≈ 12,993.24	Result of the numerator.
Step 3: Calculate the denominator:	Compute the bottom part of the equation.
Denominator ≈ $(1.34489 + 1.51071) – 1$	Compute the sum of the exponentiated terms minus 1.
Denominator ≈ 1.85560	Result of the denominator.
Step 4: Divide the numerator by the denominator:	Compute the final division to get the monthly payment.
MP ≈ $\frac{12,993.24}{1.85560}$	Divide the numerator by the denominator.
MP ≈ $7,004.21	The final monthly payment.

What is 2/1 Buydown Calculator?

The 2/1 Buydown Calculator is a financial tool that is helpful in calculating the monthly mortgage payment when the interest rate changes over two periods. In a 2/1 buydown scenario, the interest rate is typically lower in the first year (r1) and increases in the second year (r2). This allows borrowers to ease into their mortgage payments, starting with lower payments that gradually increase. It helps calculate the blended monthly payment, taking into account the different interest rates over the two periods