Mortgage planning · Reviewed September 14, 2026
2-1 Buydown vs Price Cut vs Points: Fall 2026 Comparison
Answer first: A 2-1 temporary buydown lowers the payment for years one and two, then returns to the full note-rate payment. A price cut lowers the loan amount permanently, while discount points lower the note rate permanently. The better choice depends on subsidy size, cash, taxes, qualification and how long you expect to keep the loan.
How a 2-1 buydown works
With a 2-1 structure, the note rate remains the contractual rate, but an escrowed subsidy covers the difference between the note-rate payment and a payment calculated two percentage points lower in year one and one point lower in year two. Year three uses the full note-rate payment. A 3-2-1 structure extends the stepped period by another year.
Compare the three incentives
| Option | Main benefit | Main risk |
|---|---|---|
| 2-1 buydown | Early payment relief | Payment rises in year three |
| Price cut | Permanent smaller balance | May save less monthly at high rates |
| Discount points | Permanent rate reduction | Upfront cost and break-even period |
Qualification usually uses the note rate
Do not assume the teaser payment determines approval. Many programs underwrite the borrower at the full note rate. Confirm the lender’s program rules, seller-credit limits and how the subsidy is documented. Use the full payment in the Affordability Calculator, not only the first-year payment.
When a price cut may win
A price reduction reduces the financed amount and may lower taxes or future interest. It can be attractive when you expect to keep the loan for many years. A buydown may be more useful when near-term cash flow matters and the seller is offering a credit that cannot be converted efficiently into a price reduction.
When points may win
Points can make sense when you have cash available, the permanent rate reduction is meaningful and your expected holding period exceeds the break-even period. Compare the points cost with the monthly savings and ask whether refinancing would make the upfront cost unrecovered.
Payment-shock checklist
- Can the household afford the full note payment today?
- What happens if taxes, insurance or HOA dues rise?
- Who controls unused subsidy funds if you refinance or sell?
- Are seller credits within the loan-program limits?
Model the payment path in the Temporary Buydown Calculator, then compare permanent points in the Points Calculator. Get the agreement and servicing treatment in writing.
Frequently asked questions
Mortgage Rate FAQs
Does the Fed set mortgage rates?
No. The Fed sets the federal funds target, while 30-year mortgage rates are priced in bond and mortgage-backed-securities markets.
Should I wait for the Fed meeting to lock?
A lock decision depends on your closing timeline, risk tolerance and lender terms. The meeting can create volatility in either direction.
What calculator should I use?
Use the Mortgage Calculator for principal, interest, taxes, insurance and HOA assumptions, then compare the lender Loan Estimate.
Sources and disclaimer: The Federal Reserve meeting dates were checked against the official FOMC calendar on September 14, 2026. This is educational information, not a rate forecast, lending offer or financial advice.