You’ll hear a lot about “buying down the rate” — especially on new construction in DFW. Done right, it can genuinely lower your payment. Done without doing the math, you can overpay. Here’s how rate buydowns and points actually work.
Discount points: paying to lower your rate
A discount point is a fee you pay the lender at closing — typically 1% of the loan amount per point — in exchange for a lower interest rate for the life of the loan. You’re pre-paying interest to save monthly. The key question: how long until the monthly savings repay the upfront cost (your “break-even”)? If you’ll keep the loan well past break-even, points can pay off. If you might sell or refinance sooner, they may not.
Permanent vs. temporary buydowns
- Permanent buydown — points lower your rate for the whole loan term.
- Temporary buydown (like a “2-1 buydown”) — your rate is reduced for the first year or two, then steps up to the full rate. Builders and sellers often fund these as an incentive. Great for easing into payments — just be sure you can comfortably afford the full payment once it kicks in.
The new-construction angle
In DFW’s new-construction market, builders frequently offer rate buydowns as incentives. The catch: they’re usually tied to the builder’s preferred lender. Always get a comparison quote from an outside lender so the buydown is a true bonus, not a trade for an otherwise worse rate. (More in the New Construction Buyer Guide.)
How buydowns interact with your cash
Points and permanent buydowns add to your upfront costs (part of closing costs and your cash to close) — unless a seller or builder is paying for them via concessions, which is often the better deal for you.
The bottom line
Buydowns and points are tools, not gifts — run the break-even math and compare lenders. The right call depends on how long you’ll keep the loan and who’s footing the bill.
Want help weighing an incentive offer on a DFW home? Reach out.
General educational information, not lending or financial advice. Rates, point pricing, and buydown structures vary by lender and change frequently. Confirm specifics with a licensed lender.