Quick Answer
A permanent buydown means paying discount points at closing to lower your rate for the entire life of the loan, with one point, about 1% of the loan amount, typically buying roughly 0.25% off the rate. It costs more upfront than a temporary buydown, but the savings run for all 30 years. It wins when you plan to stay in the home long term. Ask Patrick how permanent buydowns would work for your loan.
Here is the money problem, Patriot Nation: the rate on the table is higher than you want to pay for the next 30 years, and you have cash at closing to do something about it. A permanent rate buydown trades that cash for a lower rate that lasts the entire loan. The whole game is the break-even: how many months before the monthly savings pay back the upfront cost. Get that number right and you know exactly whether the buydown is a money saver or a money trap.
What a permanent rate buydown is
A permanent rate buydown means paying discount points at closing to reduce your interest rate for the entire life of the loan. The term to know is discount point: 1% of the loan amount paid upfront. The meaning in plain English: you pay the lender now so the rate, and the payment, stay lower for all 30 years, not just the first few.
The money side: the cost is upfront and permanent, and you cannot get it back if you sell early.
The real-world consequence: the buydown only pays if you keep the loan long enough for the savings to catch the cost.
What it costs you in dollars
One point costs 1% of the loan amount and typically buys about 0.25% off the rate. On a $300,000 loan, one point is $3,000 and two points are $6,000. The exact rate reduction varies by lender and market conditions, so I always price the actual point grid before we plan on a number.
The meaning: the rate reduction per point is a pricing feature, and the lender's grid decides it, not a universal rule.
The money side: two points double the cost and usually double the rate reduction, but the break-even stays in the same neighborhood.
The real-world consequence: ask for the point grid in writing before you commit, because the quoted reduction is what the math runs on.
The break-even math
The break-even is the point cost divided by the monthly savings. If one point costs $3,000 and saves you $50 a month, the break-even is 60 months, five years. Stay past five years and the buydown keeps paying; sell or refinance before it and you paid for savings you never collected. That is the single number that decides the whole deal.
The meaning: the break-even is the month your savings catch up to your cost, and everything after it is pure gain.
The money side: a five-year break-even on a 30-year loan means 25 years of savings if you stay the full term.
The real-world consequence: be honest about your timeline, because the break-even math does not care about your intentions.
Permanent vs temporary buydown
A permanent buydown lowers the rate for the full term and costs more upfront. A temporary buydown, like a 2-1 or 3-2-1, lowers the rate for the first one to three years and costs less, and it is often paid by the seller. Permanent wins for long-term owners; temporary wins when you need payment relief in the early years and the seller is funding it.
The meaning: permanent buys a lower rate for life, temporary buys a lower payment for the early years.
The money side: on a $300,000 loan, a 2-1 buydown can save hundreds of dollars a month in year one, then settle back to the market rate.
The real-world consequence: match the buydown type to your timeline, and never pay for a permanent buydown on a short hold.
When a permanent buydown wins
The buydown wins when you plan to stay seven years or more, you have extra cash at closing beyond your reserves, and you want the lowest possible monthly payment. It also makes sense on a refinance when you are buying down the new rate on a loan you intend to keep. If your timeline is short or your cash is thin, the no-point rate is usually the smarter move.
The meaning: the buydown is a long-horizon tool, and the horizon is the whole decision.
The money side: every month past the break-even is savings in your pocket, so the longer the hold, the better the deal.
The real-world consequence: keep your reserves intact, because cash after closing protects you when life happens.
Seller-funded points
Sellers can contribute to discount points as part of seller concessions, which gets you a permanently lower rate without spending your own cash. The concession is subject to loan type limits, so we structure the offer to use the allowance where it saves you the most over time. On a long hold, seller-funded points can beat a price reduction dollar for dollar.
The meaning: the seller's concession money is a resource, and points are one of the best places to spend it.
The money side: the same dollar that cuts the price by a few dollars a month can cut the rate and save much more.
The real-world consequence: ask your loan officer to show the savings both ways before you negotiate, and make it a great one.
Ask Patrick about permanent buydowns
Get a straight answer on permanent buydowns and whether paying points makes sense for your loan.
