Mortgage Rate Buydown Calculator
Should you use your buyer rebate (or seller credit) to buy down your interest rate? See the lower payment, lifetime interest saved, and how many months it takes to break even on the points.
Loan
What a rate buydown is
A permanent buydown means paying discount points at closing — each point costs 1% of the loan amount — to permanently lower your interest rate, typically by about 0.25% per point. Two points on a $405,000 loan cost $8,100 and might drop your rate from 6.5% to 6.0%, saving about $130 a month for the life of the loan.
When it pays off
Divide the cost of the points by the monthly savings to get your break-even in months. If you'll keep the loan longer than that — and most Texas homeowners stay 7–10 years — the buydown is worth it. If you might refinance or move within two or three years, keep the cash.
Pay for points with your rebate
This is where the KAT Realty model shines. Your buyer rebate — the seller-paid buyer-agent fee minus our $4,999 flat fee — can be applied to discount points on the closing statement. On a $450,000 purchase that's roughly $8,500, enough for two points, and because you didn't pay for them out of pocket the break-even is immediate. Every month's savings is pure gain.
Frequently asked questions
How much does one point lower the rate?
Typically 0.125–0.375%, with 0.25% a common rule of thumb. It varies by lender and market; ask for a points schedule with your Loan Estimate.
Are discount points tax deductible?
Points on a purchase loan for your primary residence are generally deductible in the year paid if you itemize. Confirm with your tax advisor.
What's the difference between a permanent and a 2-1 buydown?
A permanent buydown lowers the rate for the whole loan. A 2-1 temporary buydown lowers it 2% in year one and 1% in year two, then returns to the note rate; builders often offer these.
Can seller credits pay for points?
Yes, within your loan program's seller-concession limits. Rebates and seller credits can be combined.
Should I buy down the rate or make a bigger down payment?
If you'll stay long-term and rates are high, points usually save more per dollar. If you're near a 20% threshold, reaching it to drop PMI may win. Run both calculators.
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KAT Realty Group is a full-service flat fee real estate service: buyer representation for $4,999 and seller listing for $5,999, serving Austin, Dallas–Fort Worth, Houston, San Antonio and all of Texas. See all calculators or request a consultation.