A mortgage rate buydown California buyers use at closing lets you pay upfront to reduce your interest rate, either for the first two years or for the life of the loan. In Orange County, at today’s rate of 6.47%, one discount point costs 1% of your loan amount and typically drops your rate by 0.25%. On a $900,000 loan, that’s $9,000 upfront to get to about 6.22%, saving roughly $145 per month and breaking even in about five years.
By Austin Criss, REALTOR® | RE/MAX TIFFANY | June 29, 2026
Questions about buying down the rate? Call or text me at 714.600.1176.
If your lender quoted you 6.47% and mentioned “buying it down,” here’s what that actually means and whether the math works in your favor. The answer depends on how long you plan to stay, how much cash you have available, and whether the seller is willing to help fund it.
What Is a Mortgage Rate Buydown?
A rate buydown is simply prepaid interest. You pay a lump sum at closing in exchange for a lower interest rate. That lump sum comes back to you over time through reduced monthly payments.
There are two flavors: permanent and temporary. Each solves a different problem.
Permanent Buydown: Discount Points
With a permanent buydown, you pay discount points at closing and your rate stays lower for the entire 30-year life of the loan. One point equals 1% of the loan amount and typically reduces your rate by about 0.25%, though the exact reduction varies by lender and market conditions.
Here’s what that looks like on an OC purchase:
- Loan amount: $900,000 (10% down on a $1,000,000 Cypress home)
- Rate without buydown: 6.47%, with a monthly payment of roughly $5,665
- One point cost: $9,000
- Rate with one point: 6.22%, with a monthly payment of roughly $5,520
- Monthly savings: about $145
- Break-even: $9,000 / $145 = 62 months, or about 5.2 years
If you stay in the home past the break-even point, the buydown saves you money. If you sell or refinance before that, you paid $9,000 for a reduced benefit.
I walk my buyers through this math at the pre-approval stage. Most people assume buying down the rate is always smart, but it depends entirely on your timeline and how you plan to use the cash instead.
Temporary Buydown: The 2-1 Buydown
A temporary buydown lowers your rate for the first one to three years before it steps back up to the note rate. The most common structure in the current OC market is the 2-1 buydown: your rate drops 2% in year one and 1% in year two, then returns to the full rate in year three.
On that same $900,000 loan at 6.47%:
- Year 1 rate: 4.47%, with a monthly payment of roughly $4,540
- Year 2 rate: 5.47%, with a monthly payment of roughly $5,090
- Year 3+: back to 6.47%, with a monthly payment of roughly $5,665
The savings in years one and two total roughly $20,000 to $21,000, which is the amount someone has to fund upfront to make this work. The money sits in an escrow account and covers the difference between what you pay and what the lender receives each month.
The 2-1 buydown does not change the note rate or the long-term cost of the loan. It shifts cash flow. That’s useful if you have startup costs in the new home (renovations, furnishings, moving expenses) and want lower payments while you get settled.
When a Rate Buydown Makes Sense in Orange County
A permanent buydown makes sense when:
- You plan to stay in the home at least five to seven years
- You’re not expecting to refinance within the break-even window
- You have cash available after closing costs and your down payment
- The seller is offering concessions you can direct toward the buydown
A temporary buydown makes sense when:
- You expect your income to grow in the next two years (career progression, spouse returning to work)
- You have known near-term expenses (renovation, new baby) that will ease by year three
- A seller is offering concessions and you’d rather have short-term payment relief than a price reduction
In my experience working with first-time buyers in Cypress and Buena Park, the 2-1 buydown comes up most often when a seller is motivated and inventory has been sitting. It’s a way to make a deal work for both sides without adjusting the purchase price.
When to Skip the Buydown
There are situations where buying down the rate is the wrong move:
- You’re putting down less than 20%. Every dollar you use to buy down the rate is a dollar not going toward the down payment or eliminating PMI. On a $900,000 loan, PMI can run $450 to $700 per month. Removing that cost often beats the buydown math. See how PMI works in California and when you can cancel it.
- You’re likely to sell or refinance soon. If rates drop 1% in the next two years, you’ll refinance. Paying $9,000 upfront to lower today’s rate makes no sense if you’re going to replace the loan anyway.
- Cash is tight after closing. Closing costs in OC typically run 2% to 3% of the purchase price. If you’re stretched to get to closing, preserve the cash, not the rate.
Can the Seller Pay for Your Rate Buydown?
Yes, and this is underused. Under the California Residential Purchase Agreement, sellers can pay for a buyer’s rate buydown as a seller concession. If a seller is offering $15,000 toward closing costs, you can direct that money toward a 2-1 buydown or discount points instead of other closing expenses.
Concession limits vary by loan type. Conventional loans cap seller contributions at 3% of purchase price for buyers putting down less than 10%, 6% for 10-25% down, and 9% for 25%+ down. FHA loans cap at 6%. VA loans cap at 4%. Always confirm the limit with your lender before writing the concession into the offer.
I’ve seen seller-funded buydowns work well when a listing has been on the market for 30+ days. Rather than cutting the price, the seller funds a 2-1 buydown that costs roughly the same but gives the buyer near-term payment relief and keeps the sold price intact for the seller’s equity picture.
The current Freddie Mac weekly average is 6.47% as of June 18, 2026. Whether you buy it down or not, you’ll want to lock your rate once you’re in contract. Floating the rate in a volatile market adds risk that no buydown can offset.
If you’re comparing a mortgage rate buydown against putting more down, run the numbers both ways. A larger down payment affects your down payment and PMI picture permanently. A buydown affects your rate. They solve different things. What’s right depends on your full financial picture, and that’s worth a 15-minute call with your lender before you commit.
Frequently Asked Questions
How much does a mortgage rate buydown cost in California?
One discount point costs 1% of your loan amount and typically lowers your rate by about 0.25%. On a $900,000 loan in Orange County, one point costs $9,000, and the monthly savings come to roughly $145. At that pace, you hit break-even at about 62 months, or just over five years. Two points would cost $18,000 and save around $290 per month. Most lenders allow up to three or four points, though the rate reduction per point may diminish at higher quantities. Always ask your lender to run the exact break-even based on your specific loan terms before you commit.
What is a 2-1 buydown mortgage?
A 2-1 buydown lowers your interest rate by 2 percentage points in year one and 1 percentage point in year two before returning to your note rate in year three. The upfront cost equals the total interest savings over those two years, so no one is losing money: the person funding it (you or the seller) is prepaying the interest. At 6.47%, a 2-1 buydown brings year one to 4.47% and year two to 5.47%. On a $900,000 OC loan, that saves around $1,125 per month in year one and around $575 per month in year two, a meaningful difference when you’re also covering moving expenses and potential renovations.
Is it better to buy down the rate or make a larger down payment?
This depends on where you stand with PMI. If you’re putting down less than 20%, adding more down payment can eliminate PMI entirely, which saves $450 to $700 per month on a $900,000 OC loan. That’s a much faster payback than a buydown. If you’re already at 20% or more, then the buydown comparison comes down to rate sensitivity: how much does the lower rate save you versus what else you’d do with that cash? I always tell buyers to run both scenarios with their lender side by side. There is no universal right answer.
Can the seller pay for a rate buydown in California?
Yes, sellers can fund a rate buydown under the California RPA as a seller concession, and it’s a negotiating tool that gets overlooked. Sellers in slower markets sometimes offer a 2-1 buydown as a listing incentive because it moves the needle for buyers without reducing the sales price on record. The concession limits are 3% for conventional buyers under 10% down, 6% for 10-25% down, and up to 9% above 25% down. FHA caps at 6% and VA at 4%. Ask your agent to work the buydown into the offer terms before asking for a price reduction, because both parties often come out ahead.
Your specific break-even depends on your loan amount, rate, and how long you plan to stay. If you want to run the numbers on your actual scenario, I’m happy to walk through it with you. Call or text me at 714.600.1176. Always Ask Austin.
About Austin Criss
Austin Criss is a REALTOR® with RE/MAX TIFFANY serving Cypress, Buena Park, and throughout Orange County, California. He works with first-time buyers getting into their first home and move-up sellers navigating how to sell their current home and buy the next one at the same time. Call or text at 714.600.1176, or visit austincriss.com.