Should You Buy Mortgage Points or Ask for a Seller-Paid Rate Buydown in Today's Market?

Updated September 2026

Whether you should buy mortgage points or ask the seller to pay for a temporary rate buydown depends mostly on how long you plan to keep the loan: points permanently lower your rate for the life of the loan and pay off over time, while a seller-paid buydown temporarily lowers your payment for the first year or two before returning to the full note rate. Both strategies exist to fight the same problem — a higher-than-comfortable interest rate in today's market — but they move money differently, and choosing the wrong one for your specific plans can waste thousands of dollars either upfront or over the life of the loan.

How Do Mortgage Discount Points Work?

One discount point typically costs 1% of your loan amount and permanently lowers your interest rate by roughly 0.25 percentage points for the entire term of the loan — so on a $600,000 loan, one point costs $6,000 and might take the rate from, for example, 6.5% down to 6.25%. Points can be purchased in fractional amounts too, and because the rate reduction is permanent, points make the most sense for buyers who plan to stay in the home and keep the loan for many years, since the savings compound over time rather than expiring.

How Does a Seller-Paid Temporary Rate Buydown Work?

A temporary buydown, commonly structured as a "2-1 buydown," reduces your effective interest rate by 2 percentage points in year one and 1 percentage point in year two, after which your payment reverts to the loan's actual note rate for the remaining term. Because it's typically funded by the seller or builder as a purchase incentive rather than paid for by the buyer out of pocket, a temporary buydown can make a home more affordable in the first year or two of ownership — which can be especially useful if you expect your income to rise or plan to refinance before the full rate kicks in.

How Do You Calculate the Break-Even Point on Discount Points?

To find your break-even point, divide the total cost of the points by your monthly payment savings: for example, $6,000 in points that save you $130 per month works out to roughly 46 months, or just under four years, before the upfront cost pays for itself. If you expect to sell or refinance before reaching that break-even point, buying points typically doesn't make financial sense — but if you're confident you'll keep the loan well past that point, the long-term savings can be substantial.

Which Option Makes More Sense for Your Situation?

If you're negotiating with a motivated seller and plan to keep the loan for a shorter period, asking for a seller-paid temporary buydown can lower your costs in the critical first year or two without spending your own cash upfront. If you're buying with a long-term hold in mind and have extra cash to put toward the purchase, permanent discount points may deliver more savings over the full life of the loan — and in some negotiations, buyers ask sellers to cover discount points instead of (or alongside) a price reduction, so it's worth discussing both options with your lender and agent before finalizing an offer strategy.

Frequently Asked Questions About Mortgage Points and Rate Buydowns

Can a seller pay for permanent discount points instead of a temporary buydown?
Yes — sellers can agree to credit funds toward permanent discount points as part of purchase negotiations, which functions differently from a temporary 2-1 buydown but is negotiated the same way, as a seller concession.

Are mortgage points tax deductible?
In many cases yes, subject to IRS rules and limits that depend on your specific situation, so consult a tax professional to confirm how points apply to your return.

What happens to my payment after a 2-1 buydown ends?
Your payment increases to reflect the loan's full note rate starting in year three, so budgeting for that increase in advance is essential rather than assuming the lower initial payment is permanent.

Can you combine discount points with a temporary buydown?
In some cases lenders allow combining strategies, but availability depends on the specific loan program and lender guidelines, so ask your loan officer to model both scenarios side by side.

This is general information, not financial advice — the numbers used here are illustrative examples, not current rate quotes, so consult a mortgage lender to run the specific math for your loan amount and rate. Andrea Pazmino-Pace, DRE #02013784.