Rate Buydown vs Points 2026: What's the Difference?
Both lower your rate—but one is temporary and one is permanent. Here's how to choose the right option for your situation.
⚡ Key Difference
Rate Buydown
TEMPORARY
- • Lower rate for 1-3 years only
- • Then goes to full rate
- • Often paid by seller
- • Good if you'll refinance soon
Mortgage Points
PERMANENT
- • Lower rate for life of loan
- • Never increases
- • Paid by buyer
- • Good if you'll keep loan 5+ years
Side-by-Side Comparison
| Feature | Rate Buydown | Mortgage Points |
|---|---|---|
| Duration | 1-3 years | 30 years (life of loan) |
| Who Pays? | Usually seller | Usually buyer |
| Typical Cost | 1.5-3% of loan | 1-2% of loan per point |
| Rate Reduction | 1-2% (temporary) | 0.25% per point (permanent) |
| Best If You... | Plan to refinance in 2-3 years | Plan to keep loan 5+ years |
| Tax Deductible? | No (seller paid) | Yes (buyer paid) |
Types of Rate Buydowns
2-1 Buydown (Most Common)
How 2-1 Buydown Works:
| Year | Rate Reduction | Your Rate | Payment ($400K loan) |
|---|---|---|---|
| Year 1 | -2% | 4.5% | $2,027 |
| Year 2 | -1% | 5.5% | $2,271 |
| Years 3-30 | 0% | 6.5% | $2,528 |
Cost: ~$12,000 (1.5-2% of loan) | Savings: $9,012 over 2 years
3-2-1 Buydown
How 3-2-1 Buydown Works:
| Year | Rate Reduction | Your Rate | Payment ($400K loan) |
|---|---|---|---|
| Year 1 | -3% | 3.5% | $1,796 |
| Year 2 | -2% | 4.5% | $2,027 |
| Year 3 | -1% | 5.5% | $2,271 |
| Years 4-30 | 0% | 6.5% | $2,528 |
Cost: ~$18,000 (2.5-3% of loan) | Savings: $15,888 over 3 years
When to Choose a Buydown ✅
- Seller is offering to pay — Free money, take it!
- You expect to refinance in 2-3 years — If rates drop, you'll refi anyway
- Your income will increase — Can afford higher payments later
- You need lower payments NOW — Cash flow is tight initially
- New construction with builder incentives — Builders often offer buydowns
When to Choose Points ✅
- You're paying yourself — Points give permanent savings
- You'll keep the loan 5+ years — Time to recoup the cost
- Rates are high and unlikely to drop — Less chance you'll refinance
- You want tax deductions — Points are deductible
- You have extra cash at closing — Invest in lower rate
Real Comparison: Same $12,000 Budget
$400,000 loan at 6.5% base rate | $12,000 to spend
Option A: 2-1 Buydown
- Year 1: $2,027/mo (save $501/mo)
- Year 2: $2,271/mo (save $257/mo)
- Years 3-30: $2,528/mo
- Total savings: $9,096
Option B: 3 Points (Permanent)
- Rate: 5.75% (permanent)
- All 30 years: $2,334/mo
- Monthly savings: $194
- Total savings: $69,840 (30 yrs)
Verdict: Points win if you keep the loan. Buydown wins if you refinance in 2-3 years.
🔍 See Your Options
Compare lenders offering buydowns and points. Get personalized quotes.
Compare Lender Offers →Frequently Asked Questions
What is the difference between a rate buydown and mortgage points?
Rate buydowns are temporary (1-3 years), then your rate goes to the full amount. Mortgage points are permanent rate reductions for the life of the loan.
What is a 2-1 buydown?
A 2-1 buydown reduces your rate by 2% in year 1, 1% in year 2, then goes to the full rate in year 3+. Cost is typically 1.5-2% of loan amount.
Should I get a buydown or pay points?
Get a buydown if the seller is paying or you'll refinance soon. Pay points if you're paying yourself and plan to keep the loan 5+ years.
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David Rodriguez
Refinance & Rate Specialist
Refinance expert with 10+ years in rate analysis and market trend forecasting.