Compare a temporary 2-1, 3-2-1 or 1-0 buydown with permanent discount points. See the payments, the cost and the break-even.
A sample rate for illustration. Use a rate you have been quoted.
Temporary buydowns are usually paid for as a concession, not by the buyer. Concession limits depend on the loan program.
One point costs 1% of the loan. A rule of thumb is about 0.25% off the rate per point, but it varies by lender, program and day. Use your actual quote.
Year 1 savings
$0
| Year | Rate | P&I per month | Saved per year |
|---|
Principal and interest only. Taxes, insurance, mortgage insurance and HOA are not included. Buydown availability, pricing and limits depend on the lender, loan program and the day.
Both lower a payment, but they are built for different situations.
The rate is 2% lower in year 1 and 1% lower in year 2, then it returns to the note rate for the rest of the loan. The cost sits in escrow and subsidizes the payments.
It is the sum of the payment differences across the three years, which this tool shows as the total subsidy cost. It scales with the loan size and the rate, which is why it is usually funded as a concession.
Unused buydown funds are typically credited toward closing costs or principal. Confirm how it works for your loan.
A common rule of thumb is about 0.25%, but it changes by lender, program and day. Compare the same lender's no-point rate with the bought-down rate.
Points on a primary residence purchase are generally deductible in the year paid, and refinance points are usually spread over the loan. Rules have conditions, so ask a tax professional.
Duane Buziak, NMLS #1110647. Licensed in VA, TN and GA. Brokered through Coast2Coast Mortgage, NMLS #376205. For illustration only. Not a loan offer, commitment or rate quote. Equal Housing Opportunity.