2-1 buydown or buying points: which is better?
They are different instruments, not two settings of the same one. A 2-1 buydown is money held in escrow that pays part of your payment in the first two years while your note rate stays put; buying points pays the lender up front to cut the note rate itself, for as long as you hold the loan. The temporary one wins if you sell or refinance early; the permanent one wins if you hold. Where exactly they cross depends on what a point buys the day you lock, which is the one number this page cannot honestly give you.
Every figure on this page is arithmetic on the numbers stated, produced by the same formula behind our payment calculator. It is not a quote and not an offer of credit.
What they do differently
| 2-1 buydown | Buying points | |
|---|---|---|
| Changes the note rate | No, never | Yes, permanently |
| How long the benefit lasts | Two years, then it stops | The life of the loan |
| Helps you qualify | No: underwriting uses the note rate | Yes: it lowers the note rate |
| If you refinance early | Unreleased escrow was never spent | The money is spent |
| Usually paid by | The seller, as a concession | The buyer, at closing |
| Cost is knowable in advance | Yes, it is arithmetic | Only on the day you lock |
The break-even, without inventing a number
A 2-1 buydown on a $500,000 loan at 6.5% costs $11,380. Spend that same amount on points instead and it has to earn its way back monthly. Here is the monthly saving a permanent reduction would need to deliver just to match it, by how long you keep the loan:
| If you keep the loan | Points must save at least |
|---|---|
| 5 years | $190/mo |
| 7 years | $135/mo |
| 10 years | $95/mo |
| 30 years | $32/mo |
For scale only: if $11,380 bought a 0.5% permanent reduction on this loan, the payment would fall from $3,160 to $2,998, a saving of $163 a month. That would beat the temporary buydown for anyone keeping the loan past about 70 months. Whether $11,380 actually buys 0.5% is the part that changes daily, and it is why the table above gives you the threshold rather than the answer.
Buydowns and points, answered
What is the difference between a 2-1 buydown and buying points?
A 2-1 buydown is a pot of money held in escrow that pays part of your payment for you in the first two years. Your note rate never changes, and when the escrow runs out the payment goes to full. Buying points pays the lender up front to reduce the note rate itself, permanently, for as long as you hold the loan. One is a temporary subsidy, the other is a permanent price change.
Which one saves more money?
It depends entirely on how long you keep the loan. A $11,380 temporary buydown on a $500,000 loan at 6.5% delivers all of its benefit inside two years. For the same money spent permanently to beat it, the rate reduction would need to save more than $190 a month if you hold five years, or more than $32 a month across thirty. Whether it can is set by what a point buys on the day you lock, which changes daily and by loan product.
Can I do both?
Yes, and on a large seller concession that is often the better use of the money: buy the note rate down permanently with part of it and fund a shorter temporary buydown with the rest. It is one of the more common things people do not think to ask for, because the two are usually presented as alternatives.
Does either one help me qualify?
Points can, because they lower the note rate and the loan is underwritten at the note rate. A temporary buydown cannot, because the note rate is unchanged and underwriting ignores the subsidy. If qualifying is the constraint, that difference is decisive and it is the first thing to say to a loan officer.
Why will nobody give me the exact break-even?
Because it needs the current price of a point on your specific loan, and that moves daily with the market and differs by product, credit profile and loan size. Any page quoting a fixed points-to-rate ratio is quoting a number that was true on some day for some borrower. The honest version is the rule: get both priced against the same dollar amount, on the same day, on your loan.
Get both priced against the same dollars
The comparison only resolves on the day you lock, on your loan. A loan officer can run the temporary and the permanent side by side and show you where they cross.
Figures on this page are estimates computed from the amounts, rates and terms stated, for information only. They are not a quote, an offer, or a commitment to lend or extend credit. Your rate is set at approval and your payment depends on credit approval, underwriting, the property, taxes, insurance and any HOA obligation. All loans subject to credit approval. Vanna Lending, LLC dba Blue Pebble Loans, NMLS #2447767, licensed in CO, CA, NM, FL, & TX. Equal Housing Opportunity.