What is it? (plain English)
Points are upfront fees paid at closing, expressed as a percentage of the loan. Discount points are points paid to permanently lower your interest rate (a permanent buydown). A temporary buydown uses prepaid funds — often seller-paid — to reduce your rate for the first year or few years, after which it returns to the note rate. Origination points are an upfront fee for making the loan.
Who is it for?
Any borrower weighing upfront cost against monthly payment — and anyone offered a "lower rate" without understanding what it costs to get there.
When might it make sense?
When you're comparing loan offers, deciding whether to pay points, or evaluating a seller-paid buydown in a purchase negotiation.
Good to know
Paying points to lower your rate only pays off if you keep the loan past the break-even point. A temporary buydown lowers early payments but you typically must still qualify at the full note rate — and the payment rises later. The right choice depends heavily on how long you'll keep the loan.
Potential advantages
You can tell whether paying points actually saves you money, evaluate a buydown offer clearly, and avoid paying for a lower rate you won't hold long enough to benefit from.
Potential limitations
Points are sunk cost if you sell or refinance early; temporary buydowns mean a rising payment you need to be ready for; "lowest rate" offers often hide points in the cost.
Documents you may need
Your expected hold period and a side-by-side of each offer's rate and upfront cost.
Questions to ask before you choose
- What's my break-even on paying points?
- How long will I keep this loan?
- With a temporary buydown, can I afford the payment once it resets?
- Is this offer's lower rate worth the upfront cost?
How Kyon helps
We help you compare offers on total cost — not just the headline rate — and decide whether points or a buydown actually serve your timeline.