PATRICK’S QUICK ANSWER
A rate buydown lowers your rate and payment for a set period, and in 2026 builders are practically giving them away. A 2-1 buydown on a $300,000 loan can save roughly $360 a month in year one and $180 in year two, funded by seller or builder concessions. It is distinct from discount points, which lower your rate for the life of the loan. I help you decide if the early savings fit your plan.
A mortgage rate buydown lowers your interest rate, and your payment, for a period of time, and in 2026 you can hardly tour a new-build community without a builder offering one. But a buydown is not free money, it is a cost paid up front, either by the builder, the seller, or you, and the question is whether it is worth it for your situation. Here is how they work and how to decide.
I will cover temporary 3-2-1 and 2-1 structures, permanent points, who pays, why buydowns are everywhere in new construction, the break-even math on points, and the tradeoff of a lower payment now versus the cost over time. Every figure is an estimate.
What a Buydown Actually Is
A buydown is an up-front payment that lowers your interest rate, either for a few years or for the whole loan. The two big families are temporary buydowns, which lower the rate for the first one to three years and then step back up, and permanent buydowns, which use points to buy the rate down for the entire loan term. Both trade cash today for a lower payment, and the difference is how long you keep the benefit.
Temporary Structures: 3-2-1 and 2-1
A 3-2-1 buydown lowers your rate by 3 points in year one, 2 in year two, and 1 in year three before reverting to the note rate. A 2-1 buydown lowers it by 2 points in year one and 1 in year two before reverting. The builder or seller funds escrowed amounts to cover the difference, so your payment is lower early, then rises to the full payment in year three or two. These are most common in new construction because builders use them as an incentive.
Permanent Points and the Break-Even
A permanent buydown, buying points, lowers your rate for the life of the loan, and the price is expressed in discount points, each typically 1% of the loan amount. The question is your break-even, how many months the monthly savings takes to repay the up-front cost. If you plan to stay past the break-even, points can save you more over time; if you may refinance or move first, the savings may never catch up.
Who Usually Pays
In new construction, builders most often pay for temporary buydowns as an incentive, which can make them genuinely attractive because someone else is funding your lower payment. A seller can fund one through a concession, and a buyer can pay for points out of pocket or roll them into the rate structure. The source of the funds changes the math a lot, which is why I always ask who is paying before I judge whether a buydown is a good deal.
Why Buydown Offers Are Everywhere in 2026
With rates in the high 6s in 2026, builders and sellers use buydowns to make monthly payments attractive and move inventory. A temporary buydown lowers the early payment without permanently cutting the price, which makes the deal look better than a price cut on paper. That means you should compare the effective cost after the buydown, not just the highlighted payment, and understand what the payment becomes in year two or three.
The Tradeoff of Lower Payment Now vs Cost Over Time
The honest framing is simple: a temporary buydown gives today's budget a breather and then reverts, so make sure the full payment fits your budget even if rates do not drop further. A permanent buydown locks in savings you must hold long enough to reach break-even. Neither is universally good or bad, they are trade tools, and the right one depends on your plans, your timeline, and who is funding it.
Nerd Alert
The actual numbers and math behind this topic, the way I run them on the channel.
Let me run the estimates on a $350,000 new build with 10% down, a $315,000 loan, at a 6.76% base rate. A 2-1 temporary buydown would give you a roughly 4.76% year-one rate and a 5.76% year-two rate before reverting to 6.76%. At 6.76%, principal and interest is about $2,043 a month, while year one at 4.76% is about $1,643 a month, a savings of roughly $400 a month for that first year, and year two saves less, before reverting to the full payment.
Now a permanent buydown: buying 1 point, about $3,150, to lower the rate by roughly an eighth to a quarter of a point might lower the payment by around $30 to $60 a month. Your break-even on that point would be on the order of 50 to 100 months, several years, so it only pays if you stay for a long time. These are illustrative estimates based on commonly seen pricing, not quotes, and your actual rate pricing depends on your credit and the lender.
- A 2-1 temporary buydown on a $315,000 loan frees roughly $400 a month in year one and less in year two before reverting to the full payment.
- Each discount point typically costs 1% of the loan, about $3,150 on this loan, and buys roughly an eighth to a quarter point of rate.
- Break-even on a permanent point at this size is often several years, so it favors buyers who plan to stay put.
For a San Antonio or Hill Country buyer the key is source and timeline: a builder-funded temporary buydown is often a real win because someone else pays for your lower early payment, while a permanent point only pays off if you stay past break-even. Always run the full payment, not just year one, and that is exactly the kind of math I run on your side.
These are estimates for illustration, not quotes. Figures use publicly available rates and program terms at the time of writing, and your actual rate, fees, and payment depend on your credit file, loan program, and closing date.
