Calculate the approximate total cost of a 2-1 buydown: $350,000 loan, 7% note rate. Monthly payments: $1,878 at 5% (Y1), $2,098 at 6% (Y2), $2,329 at 7% (Y3+). What is the approximate buydown cost?

Correct answer: $8,200

Buydown cost = sum of payment differences over subsidized years. Year 1: ($2,329 - $1,878) × 12 = $451 × 12 = $5,412. Year 2: ($2,329 - $2,098) × 12 = $231 × 12 = $2,772. Total = $5,412 + $2,772 = $8,184, which rounds to approximately $8,200. This is the amount the seller/builder must deposit into a buydown escrow account at closing to cover the payment shortfall during the reduced-rate period.