What does one discount point cost and save?

One point costs 1% of the loan amount and typically lowers your rate by about 0.25% (it varies with market conditions). On a $400,000 loan, that's $4,000 upfront for roughly $65/month of savings — a break-even around five years.

What is a 2-1 buydown?

A temporary buydown where your rate is reduced 2% in year one and 1% in year two, then returns to the note rate. The cost is escrowed upfront — and in slower markets, sellers or builders often pay it as an incentive.

Should I pay points or make a bigger down payment?

Usually the bigger down payment wins — it builds equity you keep even if you sell or refinance early, while points only pay off if you keep the loan past break-even. Points make the most sense when you're confident you'll hold the loan 5+ years and rates aren't likely to fall.

Rates & Strategy

Mortgage Rate Buydowns Explained: Points, 2-1 Buydowns, and When They're Worth It

By Chad Knowles, Owner/Broker NMLS #968860 · Published June 30, 2026

Short answer: A rate buydown is paying money upfront to lower your mortgage rate — permanently (discount points) or temporarily (a 2-1 buydown). Whether it’s worth it comes down to one question: will you keep the loan longer than the break-even point? If you might refinance or sell before then, the buydown money is wasted.

Permanent buydowns (discount points)

One point = 1% of the loan amount, buying roughly a 0.25% rate reduction (the exact trade varies daily). The math is a simple break-even:

$400,000 loan, one point = $4,000 upfront
Rate drops from 6.75% to 6.50% ≈ $65/month savings
Break-even: about 62 months

Keep the loan five-plus years and points pay off. Refinance in year two — which many buyers who bought at rate peaks do — and the $4,000 evaporates. When rates are historically high and likely to fall, points are usually a bad bet. When rates are low and you’re settling in long-term, they can be excellent.

Temporary buydowns (2-1 and 1-0)

A 2-1 buydown gives you a payment calculated at 2% below the note rate in year one and 1% below in year two. The subsidy cost sits in escrow and covers the payment difference.

The key insight: a 2-1 buydown is most valuable when someone else pays for it. In balanced or slow Utah markets, sellers and builders frequently offer concessions — and directing that concession into a buydown often lowers your payment more than the equivalent price reduction would. A $12,000 concession as a buydown can cut your first-year payment by several hundred dollars a month; the same $12,000 off the price saves you about $75/month.

If rates fall during your buydown period, you can refinance and — a detail many buyers never learn — the unused escrowed buydown funds are typically credited back to your loan payoff.

Negotiating buydowns into your offer

This is where a broker earns their keep in offer strategy: structuring seller concessions to maximize monthly savings while staying within each program’s concession limits (3–9% depending on loan type and down payment). We coordinate directly with your agent on how to write it.

Run scenarios in our payment calculator, then get a free quote showing your rate with zero, one, and two points — plus what a seller-paid 2-1 would do. Real numbers beat rules of thumb.