Permanent buydown
Points paid to lower the interest rate for the life of the loan, subject to lender and program limits.
Home · Free tools · Buydown vs price cut
Southern California · November 14, 2026
Calculators
Rate buydown or price cut?
Builders and some sellers offer to buy down an interest rate instead of lowering the price, or they offer both. This calculator compares the monthly payment and the cash used, including a temporary first-year rate if you enter one. It is a planning estimate, not an offer and not a lender lock.
Estimate · builder incentives
Rate buydown or price cut?
Estimate only, principal and interest. Lenders, loan programs and builders set their own limits on incentives.
Who this is for, and when to use it
Buyers looking at a new-home incentive, and sellers who are thinking about paying points for the buyer instead of cutting the price, can use this page. Use it when you have a written incentive and a lender quote, then ask the lender to confirm how long the buydown lasts and what happens when it expires.
Key terms
Temporary buydown
A reduced rate for a stated period, often the first year, that later steps up to a higher permanent rate.
Price cut
A lower contract price, which can also lower the loan amount, taxes, and, in some cases, the appraisal conversation.
Points
A fee paid to the lender, usually stated as a percentage of the loan, to change the rate.
Incentive cap
Builders and lenders set their own limits on how much they will contribute and which loan programs qualify.
How to use this, step by step
- Enter the price, down payment, and the market rate you could get without the incentive.
- Enter the buydown rate, any first-year rate, and the dollar amount the builder or seller would pay.
- Compare that with the same dollars taken off the price at the market rate.
- Look at the first-year payment and the payment after a temporary buydown expires.
- Confirm the written incentive and a lender worksheet before you choose.
Costs, timelines, and common pitfalls
A temporary buydown can look cheaper in year one and then rise. A price cut can help if you may sell or refinance sooner, and it can change loan-to-value and property tax slightly. Common pitfalls include comparing a buydown with no price-cut alternative, ignoring the step-up in a 2-1 or 1-0 buydown, or assuming the incentive can be used with every loan program. Lenders, loan programs and builders set their own limits.
County-by-county notes
Orange County
New-home incentives vary by community and lender. Use the written worksheet, not a verbal rate.
Los Angeles County
The same caution applies; confirm whether the incentive is a lender credit, a price change, or a temporary buydown.
Riverside County
New communities sometimes pair buydowns with CFD taxes. Run the payment calculator with the special tax included.
San Bernardino County
The starting numbers on this tool include an illustrated builder buydown from our Ontario Ranch brief, labeled as an example.
San Diego County
Ask whether the incentive survives an appraisal below the contract price, and how it appears on the Loan Estimate.
Before you start
- Have the builder's or seller's incentive in writing, including expiration dates and loan-program limits.
- Have a lender quote at the market rate and at the buydown rate.
- Know whether the buydown is temporary or permanent.
- Include taxes, HOA and CFD in any monthly comparison, using the payment calculator if needed.
- Ask how the incentive is shown on the Loan Estimate and what happens if the loan amount changes.
A short real-estate example
Questions
Is a lower first-year rate the rate for the whole loan?
Not if the buydown is temporary. The payment can rise when the subsidy period ends.
Is a price cut always better?
Not always. It depends on how long you keep the loan, how the tax base is set, and how large the buydown is. Run both sides.
Can I use the incentive as closing-cost credit instead?
Sometimes, if the builder and the lender allow it. That is a different comparison and should be run with the closing-cost calculator.
Does this include taxes and HOA?
The comparison on this page is focused on principal and interest and the cash used for the incentive. Use the payment calculator for a full monthly number.
Will an appraisal change the incentive?
It can. Ask the builder and the lender what happens if the appraisal comes in below the contract price.
Is this a loan offer?
No. Only a lender can offer or lock a rate.
Where is the payment calculator?
On the payment and Mello-Roos page and the tools hub.
Official resource links
We link only official government or court pages. Confirm the current version on the official site.
Questions about a specific home or transaction? Call or text 833-THIS-BROKER (833-842-7465), text us, or request a call. Dr. Hamid Rowshan, Choice of America. DRE #02004794, company DRE #02240008.
This page is general information for Southern California homeowners, buyers, sellers and renters. It is not legal, tax, insurance or lending advice, not a loan offer, and not a substitute for the official agency, court, lender or insurer that will handle your file. Rules, fees, maps and forms change. Confirm every figure and every filing with the official office before you act.