Points vs. Buydowns: Stoughton Buyers’ Savings Guide

Are you trying to decide between paying mortgage points or using a 2-1 buydown to lower your payment on a Stoughton home? You are not alone. Many buyers in Norfolk County want a clear path to lower monthly costs without overpaying upfront. In this guide, you will learn what each option does, how to run the math, and how to choose the right fit for your budget and timeline. Let’s dive in.

Points: how they work

Mortgage points are prepaid interest that you pay at closing to permanently lower your interest rate. One point equals 1% of your loan amount. The exact rate drop per point depends on the lender and market conditions.

• Who can pay: You, or a seller as a concession within loan program limits.
• What you get: A lower rate and lower monthly payment for the entire loan term.
• Best for: You plan to keep the mortgage long enough to recoup the upfront cost.

The tradeoff is simple. You exchange cash today for smaller payments every month going forward. Your goal is to hit break-even, then enjoy ongoing savings.

2-1 buydowns explained

A temporary buydown, often a 2-1 buydown, reduces your payments for the first two years. Year 1 is typically 2.00% below the permanent rate. Year 2 is typically 1.00% below. Year 3 and beyond return to the permanent rate in your note.

• Who can pay: Often the seller or builder offers this as a concession. You or the lender may also fund it.
• What you get: Immediate payment relief for the first one to two years.
• Best for: You expect income growth, a refinance, or a move within a few years.

This option helps cash flow early on but does not lower your long-term rate. Qualifying rules vary by lender and loan program, so confirm whether you must qualify at the permanent rate.

Compare costs with break-even math

To evaluate points, focus on break-even. You want to know how long it takes for the lower payment to repay your upfront cost.

• Cost of points = Loan amount × points as a decimal.
• Monthly savings = Payment with no points − Payment with points.
• Break-even months = Cost of points ÷ Monthly savings.

For a buydown, the cost is the sum of the monthly subsidies during the buydown period. Lenders often calculate this as the total difference between the permanent payment and the reduced payments in Year 1 and Year 2.

Step-by-step: run your numbers

Use these inputs for a Stoughton purchase. Your lender can provide exact figures.

1. Purchase price and down payment to get your loan amount.
2. Rate quotes: no points vs. 1 point, 2 points, etc.
3. 2-1 buydown price quote and the permanent rate.
4. Loan term, usually a 30-year fixed.
5. Property taxes and insurance for full PITI context.

Payment formula for principal and interest:

M = P × r / (1 − (1 + r)^−n)

• P = loan amount
• r = monthly rate (annual rate ÷ 12)
• n = total payments (years × 12)

Hypothetical example to illustrate

The numbers below are for illustration only. Ask your lender for current Stoughton pricing and use that in your own calculation.

• Price: $500,000
• Down payment: 20% → loan = $400,000
• No-points rate: 4.50% (example)
• Rate with 1 point: 4.25% (example)
• Cost of 1 point: 1% × $400,000 = $4,000

Payments (principal and interest only):

• At 4.50%: about $2,027 per month
• At 4.25%: about $1,967 per month
• Monthly savings: about $60

Break-even on 1 point:

• $4,000 ÷ $60 ≈ 67 months, or about 5.6 years

2-1 buydown on the same loan:

• Permanent rate: 4.50%
• Year 1 rate: 2.50% → about $1,580 per month → saves about $447 per month in Year 1
• Year 2 rate: 3.50% → about $1,796 per month → saves about $231 per month in Year 2
• Total buydown subsidy: about $8,122 for two years

How to read this:

• Points help most if you will keep the mortgage beyond the break-even period.
• A 2-1 buydown delivers larger short-term relief but does not lower your long-term rate.

When points make sense

Choose points when your plan and cash allow it:

• You expect to keep the loan beyond break-even.
• You have funds after down payment and reserves.
• You want to reduce total interest paid and permanently lower the budget.
• You expect to hold the property for many years.

When a 2-1 buydown fits best

Pick a temporary buydown when early relief matters more than lifetime interest savings:

• You are a first-time buyer easing into ownership costs.
• You expect income growth or a refinance in the next one to three years.
• The seller is willing to fund a concession.
• You want to keep more cash available in the first two years.

Stoughton negotiation tips

Local conditions in and around Stoughton can shape your strategy.

• Competitive listings: Sellers may prioritize clean terms over concessions. Points may be buyer-paid if competition is high.
• Softer conditions: A seller-paid 2-1 buydown can be an attractive alternative to a price cut because it boosts your early cash flow.
• New construction: Builders sometimes use buydowns as incentives. Ask for the total dollar value and compare it to a price reduction or seller-paid points.
• Program limits: Verify concession caps for conventional, FHA, VA, or other loans before you write the offer.

What to ask your lender

Bring these questions to at least two or three lenders so you can compare quotes side by side.

• What is the no-points rate today for my scenario?
• How much does 1 point and 2 points reduce the rate, and what do they cost in dollars?
• What is the total cost of a 2-1 buydown on this loan, and how do you calculate it?
• Will you qualify me at the permanent rate or the reduced payment during a buydown?
• What are the current loan program limits on seller concessions for my loan type?

Taxes and loan limits to keep in mind

• Points paid on a purchase may be deductible as mortgage interest if IRS criteria are met. Tax treatment is complex. Consider speaking with a tax professional.
• Conforming loan limits are set by county and change periodically. Check the current limit for Norfolk County if you are near the threshold.

Quick decision guide

Use this simple framework to narrow your choice.

• If you expect to own and keep the same mortgage for many years, and you can cover the upfront cost, consider points.
• If you want near-term relief, expect higher income soon, or plan to refinance or move within a couple of years, consider a 2-1 buydown, ideally seller-paid.
• If a seller is open to concessions, ask for the option that delivers the most value for your goal. Sometimes a seller-paid buydown beats a small price reduction for your monthly budget.

Choose with confidence

You do not need to guess. Get two to three lender quotes, plug the numbers into the break-even steps above, and compare your time horizon to the results. Then tailor your offer strategy to the Stoughton market moment, including whether a seller is likely to fund concessions.

If you want help running the numbers, structuring a competitive offer, or negotiating seller-paid savings, connect with Melissa Mayer for local guidance backed by data and a community-first approach.

FAQs

What are mortgage points and how do they save me money?

• Points are prepaid interest you pay at closing to permanently lower your rate, which reduces your monthly payment and total interest over time if you hold the loan past break-even.

How does a 2-1 buydown work on a Stoughton home?

• A 2-1 buydown lowers your payment by about 2% in Year 1 and 1% in Year 2, then returns to the permanent rate. It offers short-term relief but no long-term rate reduction.

Should I choose points or a buydown if I will move in three years?

• A temporary buydown often fits a short timeline better because it maximizes early cash-flow relief without paying for a permanent rate you will not use long enough.

Can a seller in Norfolk County pay my points or buydown?

• Yes, sellers can offer concessions to fund points or a buydown within loan program limits. Confirm the cap for your loan type with your lender.

Do buydowns help me qualify for the mortgage?

• It depends on the lender. Some require you to qualify at the permanent rate, while others may allow the reduced payment if buydown funds are escrowed and documented.

Are points tax deductible when I buy a home?

• Points on a purchase may be deductible as mortgage interest if IRS criteria are met. Because rules are detailed, consider consulting a tax advisor.