With 30-year fixed mortgage rates averaging about 7.5 percent in mid-October 2026, one of the most common questions I hear from buyers in Brenham and Washington County is whether it makes sense to pay points to lower the rate. The short answer: a mortgage point costs 1 percent of your loan amount, it typically lowers your rate by roughly a quarter of a percentage point, and whether it pays off depends on how long you plan to keep the home. A 2-1 buydown is a different tool that trims your payment for the first two years and is often paid by the seller or the builder. Here is how both work, with plain numbers, so you can decide what fits your situation.
My name is De Wayne Mortensen II. I am a REALTOR® with Better Homes and Gardens Real Estate Hometown in Brenham, licensed in Texas (836279) and California (01749107), with more than 20 years helping people buy and sell property in Washington County and across Central Texas. When rates sit this high, every dollar of monthly payment counts, and points and buydowns are practical levers that buyers, sellers, and builders are using to make deals work. This guide explains them clearly, with no jargon.
What Are Mortgage Points?
A mortgage point, also called a discount point, is prepaid interest you buy at closing. One point costs 1 percent of your loan amount: on a $300,000 loan, one point costs $3,000; on a $400,000 loan, it costs $4,000. In exchange, the lender lowers your interest rate, usually by 0.125 to 0.25 percentage points per point, depending on the lender and the market. The rate cut is permanent for the life of the loan, which is the key difference between points and a temporary buydown.
How Much Does One Point Save You Each Month?
Here is the math on a typical Brenham home. Take a $300,000, 30-year fixed loan at a 7.5 percent rate: the principal and interest payment is about $2,100 a month. If you pay one point, $3,000, and the lender drops the rate to about 7.25 percent, the payment falls to roughly $2,050 a month, a savings of about $50. Divide the $3,000 cost by that $50 monthly savings and you recover the cost in about five years. That is your break-even point. Keep the loan longer than that and the points have paid for themselves; sell or refinance sooner and you may not get the money back.
The break-even formula is simple: months to break even equals the point cost divided by the monthly savings. If you plan to stay in the home past that point, points can be a sensible investment. If your plans are shorter, that cash is often better used elsewhere.
What Is a 2-1 Buydown?
A 2-1 buydown lowers your interest rate by 2 percentage points in year one and 1 percentage point in year two, then steps up to the full note rate in year three. On a 7.5 percent loan, you might pay at a rate equivalent to 5.5 percent the first year, 6.5 percent the second, and 7.5 percent from year three on. There is also a 3-2-1 buydown for buyers who want three years of stepped payments.
The cost of a buydown is the difference between the reduced payments and the full-rate payments across those first years, funded at closing, and it is often paid by the seller or the builder rather than the buyer. Builders use buydowns as an incentive on new construction, and sellers in a balanced market sometimes offer them to keep a buyer's monthly payment manageable. For a buyer whose income is expected to grow, the lower early payments can be a real advantage.
Points and Buydowns in the Current Brenham Market
Rates near 7.5 percent change the conversation for buyers and sellers in Washington County. Buyers who are pre-approved and know their monthly budget can use a buydown to buy now rather than wait, then refinance later if rates come down. Sellers competing with newer homes or other listings can offer a temporary buydown as a more concrete concession than a price cut. New construction buyers should pay close attention: many builders in the Brenham area advertise rate buydowns as part of their incentive packages, and I help buyers compare those offers against the base price. I cover the broader trade-offs in my guide to buying new construction in Brenham.
Questions Buyers Ask About Points and Buydowns
Who pays for a rate buydown?
The buyer, the seller, or the builder can pay. In a balanced market, sellers often agree to a buydown as a closing concession, and builders frequently build one into new-home incentives. The key is knowing what the credit is replacing: a $10,000 buydown credit paired with a $10,000 price increase is not a discount. I help buyers read the full picture, price and credits together.
How long do I need to keep the loan for points to pay off?
Work out the break-even: divide the point cost by the monthly payment reduction. On the $300,000 example above, that is about five years. Your lender can show you the exact payment at each rate so you can run the same math on the home you actually want. Anyone shopping financing can also get the full picture in my guide to how mortgage rates affect home buying in Brenham.
Do buydowns work with VA, FHA, or USDA loans?
Yes. VA, FHA, and USDA loans all allow points and rate buydowns, though each program has its own rules about who can pay what, and seller-paid costs are tightly regulated on VA loans. The lender who handles your program can confirm the limits before you write an offer. Many veterans and first-time buyers in Washington County use buydowns through these programs, and I explain the VA options in my guide to using a VA loan more than once.
Should I buy down my rate or use the money for a bigger down payment?
It depends on your goal. A larger down payment builds instant equity and can remove mortgage insurance on a conventional loan, while points lower your monthly payment for years. Compare both on the same home: what does each cost up front, and what does each do to your monthly payment and your equity? Then pick the one that matches your plans and your timeline.
Are points tax deductible?
Points paid to buy a principal residence are generally treated as deductible mortgage interest, but the benefit only shows up if you itemize, and most taxpayers now take the standard deduction. Run the numbers with your tax preparer before counting on a write-off.
The Bottom Line
Points and buydowns are not the same thing. Points trade cash today for a permanently lower rate, and they make sense when you keep the loan past your break-even point. A 2-1 or 3-2-1 buydown lowers the payment for the first year or two, often paid by a seller or builder to soften the early years of ownership. In a market where the 30-year fixed sits near 7.5 percent, either tool can be the difference between a payment that fits and one that does not, but only when the numbers are honest.
If you are looking at homes in Brenham, buying new construction, or weighing a seller concession, I will walk you through the real numbers on the property you want, including the points and buydown math, so you know exactly what you are committing to. Reach out anytime. No pressure, no jargon, just straight answers. Glad to help.
