Discount points · Break-even · 2-1 buydown · Upfront cost
Discount points are upfront fees paid at closing — one point equals 1% of the loan amount — in exchange for a permanently lower interest rate. The break-even point is how long it takes to recoup the upfront cost through lower monthly payments. Only buy points if you plan to keep the loan (no refinance or sale) past the break-even point. The actual rate reduction per point varies by lender and market — always ask your lender for a specific quote. A 2-1 buydown is a temporary rate reduction usually funded by the seller or builder at closing: the rate is 2% below the note rate in year one, 1% below in year two, then returns to the full note rate in year three. The subsidy amount shown is what must be escrowed at closing to fund the reduced payments in years one and two.