08/20/2026
When buyers hear about lowering their rate, most assume there's only one way to do it. There are actually two, and the right one depends entirely on your timeline.
Option one is paying points. This is a permanent rate reduction. You pay more in closing costs up front, that money is spent, and in exchange you get a slightly lower rate for the life of the loan.
Option two is a temporary rate buy down. Instead of permanently lowering the rate, funds go into an escrow account and get used to reduce your payment for the first two or three years. Here's the part most people don't know. If you refinance during that window, whatever's left in that escrow account is still yours and gets applied toward your loan.
So when do you use each? If you believe rates are about as good as they're going to get, you plan to stay in the house long term, and you don't see yourself refinancing, a permanent buy down is the better fit. If you or your spouse have a known change coming, a new job, a raise, or some other event in the next two or three years, or you expect to refinance in that window, a temporary buy down fits better.
The core difference is where the money goes. Points spend the money immediately on a permanently lower rate. A temporary buy down keeps the money working for you, applied directly to your payments now, with the leftover still yours later.
It's not about which option is better. It's about which one fits your timeline and your goals.
Save this for the next time your lender presents rate options.
