Mortgage Points vs Buydowns 2026: Break-Even Guide
Mortgage Points vs Rate Buydowns in 2026: When Paying Upfront Actually Saves Money United States | October 24, 2026 A homebuyer qualifies for a $400,000 mortgage. The lender offers a 30-year fixed rate of 7.50% without discount points. Another option requires the buyer to pay $4,000 upfront to obtain 7.25%. Meanwhile, the homebuilder advertises a 2-1 mortgage buydown that makes the first year's payments appear much more affordable. Which arrangement is worth taking? The answer depends on how long the borrower keeps the loan, what the upfront charges purchase and how much the payment increases later. Mortgage discount points and temporary buydowns can both reduce payments. But they do so in fundamentally different ways. Permanent discount points usually lower the contractual interest rate for the mortgage. A temporary buydown uses money set aside at closing to subsidise the payment for a limited period. The full mortgage note rate generally stays unchanged. With average 30-year fixe...