Permanent Buydowns: When Paying Points Actually Saves You Money

In a higher-rate environment, many buyers ask, “Should I pay points to lower my rate?”

Permanent buydowns can be a smart move — but they’re not always the right move.

The key is understanding when the break-even makes financial sense and when you’re better off saving your cash or using credits elsewhere.

What Is a Permanent Buydown?

A permanent buydown is when a borrower pays “points” upfront to reduce the interest rate for the life of the loan.

• 1 point = 1% of the loan amount

• Points reduce the rate by a set amount depending on the market

Example:

Paying 1 point on a $600,000 loan costs $6,000 and might reduce the rate by 0.25%–0.375%.

When Paying Points Does Make Sense

1. Long-Term Buyers (7–10+ years)

If you plan to stay in the home long enough to pass the break-even, points can generate tens of thousands in interest savings.

• Lower monthly payment

• Lower lifetime interest cost

• Great for “forever home” buyers

2. High-DTI Buyers Needing Payment Relief

Sometimes lowering the rate is what makes the deal qualify.

One point may drop the payment enough to bring ratios back into AUS approval range.

3. Buyers Using Seller Credits

If the seller is willing to pay, using credits for a permanent buydown often makes more sense than lowering the purchase price.

When Paying Points Does NOT Make Sense

1. You Plan to Refinance in 1–4 Years

If a refi is likely, you won’t hit the break-even.

Save your cash.

2. Move-Up Buyers

When you’re buying now but planning to sell within a few years, points usually don’t provide enough benefit.

3. Cash-to-Close Is Tight

Buydowns shouldn’t come at the cost of draining reserves.

Better to stay liquid.

How to Calculate Break-Even

Break-even = (Cost of points) ÷ (Monthly payment savings)

Example:

• Cost of points: $6,000

• Monthly savings: $175

• Break-even: ~34 months

If you’re staying longer than 34 months → smart strategy.

If not → skip it.

Bottom Line

Permanent buydowns can be a powerful way to reduce monthly cost and long-term interest, but only when aligned with the buyer’s timeline.

The decision shouldn’t be emotional — it should be mathematical.

Want a personalized break-even analysis? I run these side-by-side comparisons every day.

APPLY HERE TO GET MOVING

👉 https://apmobile.apmortgage.com/homehub/signup/mbelfor@apmortgage.com