Mortgage Points Calculator — Permanent Points & 2-1, 3-2-1 Buydowns

A discount point is an upfront fee you pay the lender to lower your interest rate. One point equals 1% of the loan amount. On a $400,000 loan, one point costs $4,000. The trade-off is a lower monthly P&I payment for the life of the loan — typically about 0.25 percentage points off the rate per point, though lenders vary. You only come out ahead if you keep the loan past the break-even month.

Break-even months = cost of points ÷ monthly P&I savings (rounded up). Cost is points × 1% × loan amount. Monthly savings is the difference between the standard amortization payment at the base rate vs the bought-down rate. If you sell or refinance before break-even, paying for points costs you more than it saves.

A 2-1 buydown reduces your interest rate by 2 percentage points in year 1 and 1 percentage point in year 2; from year 3 onward you pay the full note rate. The note rate on the loan does not change — instead, an escrow funded at closing covers the difference in P&I each month. Most 2-1 buydowns in 2025–2026 are funded by the seller or homebuilder as a concession in a high-rate market.

A 3-2-1 buydown drops the effective rate by 3 percentage points in year 1, 2 percentage points in year 2, and 1 percentage point in year 3. Starting in year 4 you pay the full note rate. The total subsidy is larger than a 2-1, which is why builders use it on higher-priced new construction. The borrower is still qualified at the full note rate by underwriting.

In the 2025–2026 market, most temporary buydowns are seller or builder concessions. Builders prefer offering a buydown over cutting the headline price because it preserves comparable sales values for the rest of the development. Borrower-paid buydowns also exist but are much less common — if you pay yourself, the cost is the same dollar amount but doesn’t produce a permanent rate reduction.

It depends on time horizon and who pays. Permanent points are usually borrower-paid and only win when you keep the loan well past break-even — typically 5–7+ years. A seller-paid temporary buydown is essentially free rate relief for the buyer in years 1–3 and is hard to turn down. If rates are expected to fall, a buydown also gives breathing room to refinance later. If you expect to stay 10+ years and rates are stable, permanent points often produce larger lifetime savings.

For temporary buydowns, the buydown escrow holds the subsidy as a separate account. If you pay off the loan early — by selling or refinancing — most lenders apply any unused buydown funds against the loan balance at payoff. Confirm with your specific lender; the rule is set by the buydown agreement, not the GSE.

Points show up in two places: they reduce your note rate, but they also count as a finance charge that raises the disclosed APR on your Loan Estimate and Closing Disclosure. APR includes the time-value cost of the points, so a lower note rate plus points typically still produces an APR close to (or slightly higher than) the no-points option. APR is informative for comparison shopping, but break-even months are what actually matters for your wallet.