{
  "meta": {
    "title": "The 9-Variable Mortgage Rate Buy-Down Decision",
    "titleHtml": "The 9-variable <em>buy-down</em> decision.",
    "description": "Mortgage discount points cost 1% of loan per 0.25% rate reduction. Nine variables — break-even period, holding length, alternative use, deductibility — determine whether points are worth buying.",
    "dek": "Buying down the mortgage rate is mostly the wrong move. Nine variables identify the cases where it pays off.",
    "datePublished": "2026-02-06",
    "dateModified": "2026-02-06",
    "section": "Personal Finance",
    "readMinutes": 5,
    "wordCount": 800,
    "keywords": ["mortgage points", "discount points", "rate buy down", "2-1 buydown", "permanent buydown", "temporary buydown", "mortgage break even", "seller paid points"]
  },
  "problem": {
    "headline": "Most buyers pay points without doing the math.",
    "price": "1%",
    "priceLabel": "Cost per 0.25% rate reduction",
    "body": "Mortgage discount points cost 1 percent of the loan amount per typical 0.25 percent rate reduction. Break-even is typically 5–7 years. Most home-buyers don't stay long enough to recover the cost; the points were money lost."
  },
  "indicatorsHeading": {
    "title": "The nine variables",
    "em": "of point purchases.",
    "sublede": "Each shifts the right answer toward buying or not buying points. The composite produces a deal-specific verdict."
  },
  "indicators": [
    {"title": "Expected holding period for the mortgage", "metric": "Threshold: > 7 years", "detail": "Break-even on most points is 5–7 years. Holding shorter than break-even loses money."},
    {"title": "Cost per discount point", "metric": "Threshold: 1% loan / 0.25% rate", "detail": "Standard market pricing. Some lenders price more or less aggressively. Compare to alternatives."},
    {"title": "Itemize vs standard deduction", "metric": "Pattern: deductible if itemizing", "detail": "Discount points on purchase mortgages are deductible in the year paid if itemizing. Refinance points amortize over loan life."},
    {"title": "Alternative use of the cash", "metric": "Pattern: opportunity cost", "detail": "1% of $400K loan is $4,000. Invested at 8% over 30 years grows to $40K+. Compare break-even savings."},
    {"title": "Rate without points (baseline)", "metric": "Pattern: floor and shop", "detail": "Compare quoted rates with and without points. Some lenders offer poor without-point rates to push points; shop multiple lenders."},
    {"title": "Lender margin reduction via competitive shopping", "metric": "Pattern: 25–50 bps achievable", "detail": "Aggressive shopping can reduce starting rate without buying points. Often beats paying points at first lender."},
    {"title": "Refinance probability within 3–5 years", "metric": "Pattern: rate forecast", "detail": "If refinancing soon is likely, points are wasted. Buy points only on stable mortgage holdings."},
    {"title": "Seller-paid points", "metric": "Pattern: free points", "detail": "Seller-paid points (in lieu of price reduction) are nearly always good for the buyer if structured correctly."},
    {"title": "Temporary buy-down structures (2-1 buy-down)", "metric": "Pattern: short-term relief", "detail": "Temporary 2-1 or 3-2-1 buy-downs reduce rate for first years. Useful in specific cases (anticipated income growth) but with limited long-term benefit."}
  ],
  "body": [
    {
      "h2": "The break-even math",
      "paragraphs": [
        "A discount point typically costs 1 percent of the loan amount and reduces the rate by 0.25 percent. On a $400,000 loan, one point costs $4,000 and saves about $50–60 per month at 30-year fixed amortization. The break-even is approximately $4,000 / $55 = 73 months, or 6+ years.",
        "Most buyers don't stay that long. The U.S. average homeowner moves every 7–10 years, but median time at a given mortgage is shorter once refinancings are counted. A buyer who pays points and refinances in 3 years has not recovered the cost; the points were a loss."
      ]
    },
    {
      "h2": "When points actually pay off",
      "paragraphs": [
        "Points work for buyers with high-conviction long-term hold plans, stable income, no anticipated refinance opportunity, and itemized tax filing. The combination is uncommon but not rare. Retirees buying their final home, military or government employees with long tenure expectations, and households in stable mortgage rates rarely refinance.",
        "For these buyers, the math can favor points. The discipline is to verify the assumptions hold rather than assume they do."
      ]
    },
    {
      "h2": "The alternative-use comparison",
      "paragraphs": [
        "$4,000 spent on points saves $55 monthly forever (or until refinance/sale). The same $4,000 invested at a 7 percent real return grows to approximately $30,000 over 30 years. The compounded alternative often dominates the lifetime monthly savings.",
        "The break-even must consider opportunity cost. Points are equivalent to a loan to the lender at the rate-reduction-implied yield. Whether that yield exceeds the holder's investment alternative determines the right choice."
      ]
    },
    {
      "h2": "Seller-paid concessions",
      "paragraphs": [
        "Seller-paid concessions for points (where the seller pays the buyer's discount points in exchange for a higher purchase price) can be advantageous to the buyer because the cost is amortized into the mortgage rather than paid upfront. The structure depends on the lender's concession-cap rules but can produce meaningful effective rate reductions for buyers.",
        "Negotiation matters. In buyer-favorable markets, seller-paid concessions for points or rate buy-downs are increasingly common. The dollar value to the buyer can be 0.25–0.50 percentage points off the rate, sometimes more."
      ]
    }
  ],
  "faqs": [
    {"q": "Are points tax-deductible?", "a": "On purchase mortgages, yes if itemizing — fully in the year paid. On refinance, amortize over the loan life. Most post-TCJA borrowers don't itemize."},
    {"q": "What's a 2-1 buy-down?", "a": "Temporary buy-down where rate is 2% below note rate in year 1, 1% below in year 2, and at the note rate from year 3. Cost paid upfront."},
    {"q": "Can I buy down to any rate?", "a": "Lenders typically cap discount points at 4–6 (1–1.5% rate reduction). Beyond that, the discounts diminish economically."},
    {"q": "Do points affect APR?", "a": "Yes. APR includes points and other costs. Compare APR across loan offers, not just nominal rate."},
    {"q": "Are origination fees the same as points?", "a": "No. Origination fees compensate the lender for processing. Discount points buy down the rate. Both are paid at closing but serve different functions."},
    {"q": "What about negative points?", "a": "Negative points (lender credits) increase the rate but reduce closing costs. Useful for short-tenure holders. Math is symmetric to positive points."}
  ]
}