Temporary Rate Buydown vs Paying Points in California
Quick answer: A temporary buydown lowers your payment for the first years, then steps up to the note rate. Paying points permanently reduces the rate for the life of the loan. Choose based on how long you will keep the loan and how much cash you can bring to closing.
California buyers often hear two different ways to lower a payment: temporary buydowns and discount points. They are not the same product.
Temporary buydown
The payment is subsidized for a set period, often one to three years. After that, you pay the full note rate. Someone has to fund the buydown account, which can be the builder, seller, or buyer depending on the deal.
Discount points
Points buy a lower rate for the entire term, assuming you keep that loan. The cost is paid upfront and should be measured with break-even math.
How to decide
- Need relief only in the first years? A temporary buydown may fit.
- Planning to keep the loan a long time? Points may pencil better.
- Cash constrained? A no-point option can preserve reserves.
Frequently asked questions
It changes the early payment schedule through a subsidy structure. Your loan officer should show the year-by-year payment.
Sometimes, subject to contract terms and program limits.
Availability depends on the loan program and lender. Ask before you count on one in your offer strategy.
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