Mortgage Rate Buydowns and Discount Points in San Diego: How They Work and When They Pay Off

by Trevor Landress

A mortgage rate buydown means paying extra money at closing, usually in the form of discount points, to get a lower interest rate. One point costs 1% of your loan amount, so on an $800,000 loan, one point is $8,000. Whether it pays off depends on how long you keep the loan, and the break-even math is simple enough to do before you sign.

The short answer

One discount point costs 1% of the loan and should come with a lower interest rate.
Points make sense mainly if you will keep the loan long enough to earn back what you paid.
Lender credits work in reverse: you pay a higher rate and the lender helps with closing costs.
Points appear on your Loan Estimate, so you can compare lenders using the same number of points.

How discount points work

The Consumer Financial Protection Bureau explains it plainly: points let you trade upfront cost for a lower monthly payment. You pay more at closing, and you receive a lower interest rate. One point equals one percent of your loan. On a $100,000 loan, one point is $1,000, and points do not have to be round numbers. You can pay 0.5 of a point or even 1.375 points.

How much a point lowers your rate depends on the lender, the type of loan and the market. The CFPB says sometimes the drop is large and sometimes it is small, so never assume a number. Ask the lender to show you the rate with zero points and the rate with points.

A San Diego example

Here is a made-up example to show the math. Say you borrow $800,000 on a 30-year fixed loan. A lender quotes you 7.40% with no points, or 7.15% if you pay one point, which is $8,000. These numbers are for illustration only, and your lender's offer will be different.

At 7.40%, the monthly principal and interest payment is about $5,539.
At 7.15%, the payment is about $5,403.
That is a savings of roughly $136 a month.
Dividing $8,000 by $136 gives a break-even of about 59 months, or around 4.9 years.

This simple math ignores the money you could earn by using the cash another way and the way your loan balance falls over time. It is still a good first check. If you expect to sell or refinance before the break-even date, the points would have cost you more than they saved.

If you keep the loan	Payment savings	Cost of the point	Net result
3 years	$4,896	$8,000	-$3,104
5 years	$8,160	$8,000	+$160
7 years	$11,424	$8,000	+$3,424
10 years	$16,320	$8,000	+$8,320

What the current rate looks like

I check the average 30-year fixed rate every week. As I write this in October 2026, the national average as of October 15 was 7.40%. Rates move, so use that number only as a rough guide, and ask your lender for a quote on the day you apply. If you are weighing whether to wait for a better rate, I cover that question in should you buy now or wait for rates to drop.

Lender credits: the opposite trade

Lender credits work the same way as points, only in reverse. You accept a higher rate and the lender gives you money to cover part of your closing costs. You pay less now and more each month. This can help a buyer who is short on cash at closing, but the extra interest adds up over time. The CFPB says credits are calculated like points and may be called negative points on a lender's sheet.

Where to see points on your paperwork

Points show up on your Loan Estimate and on your Closing Disclosure, on page 2, Section A. By law, points listed there must be connected to a discounted interest rate. Lender credits show as a negative number in Section J. Because the layout is the same for every lender, you can compare offers line by line. My list of questions to ask a mortgage lender shows how to do that.

Who benefits most from points

Points tend to fit buyers who plan to stay in the home a long time, who have enough cash left for closing costs and savings after paying them and who do not expect to refinance soon. They fit worse if you may move in a few years, or if paying for points would leave you with thin savings.

The CFPB gives one more tip: if you are unsure how long you will keep the loan, ask a loan officer to show two options, with and without points, and calculate your total costs over a short, a long and a most-likely timeframe.

What this guide cannot promise

I do not know what rate you will be offered or how long you will keep your loan. The example above is a teaching tool, and the break-even date will change with every quote. Ask your lender for written numbers on the same loan with different point levels.

My advice for San Diego buyers

Ask each lender for the rate at zero points and at one or two other point levels.
Figure out your break-even date, then compare it with how long you expect to keep the loan.
Keep enough cash after closing for emergencies before spending on points.
Compare lenders using the same number of points or credits.
Read the points line on page 2 of your Loan Estimate before you lock.

A note on advice

I am a REALTOR®, not a lender, attorney, tax professional or financial advisor, so this guide is general information. Your lender can tell you what you qualify for, and a CPA or attorney can answer tax and legal questions.

Call or text me at (619) 402-4614 or send me a message.

Call or text (619) 402-4614 Contact Trevor Landress

Related guides

Frequently asked questions

What is a discount point?

A discount point is a fee you pay at closing that lowers your interest rate. One point equals 1% of your loan amount.

How much does one point lower my rate?

It depends on the lender, the loan type and the market, so there is no single answer. Ask your lender for the rate with and without points.

Are mortgage points worth it?

They can be if you keep the loan long enough to earn back the cost. Divide the cost of the points by your monthly savings to find the break-even.

What are lender credits?

A lender credit lowers your closing costs in exchange for a higher interest rate. It is like paying negative points.

Where do I find points on my paperwork?

They appear on your Loan Estimate and on page 2, Section A, of your Closing Disclosure. Lender credits appear in Section J.

About the author

Trevor Landress is a San Diego REALTOR® with Coldwell Banker West (DRE# 02126901). He was born and raised in San Diego and has been licensed since 2021.

Trevor helps homeowners sell, guides first-time buyers through the home buying process and assists investors with their next acquisition. His work includes negotiating offers, analyzing market trends, building pricing strategies and running marketing campaigns for his listings.

He serves clients across San Diego County, from coastal communities like La Jolla, Del Mar and Carlsbad to neighborhoods inland.

Trevor is part of the Campbell Group, a three-generation real estate team, and he and the Campbell Group consistently rank as a top producing team at Coldwell Banker West each month. He writes these guides to help San Diego buyers and sellers navigate an ever-changing market. To talk through your plans, call or text (619) 402-4614 or contact Trevor Landress.

How I help San Diego home buyers

I help buyers sort out their budget, understand their loan options with a lender, search for homes, write and negotiate offers, keep track of inspection and contingency deadlines and stay organized through closing.

How I help San Diego home sellers

I help sellers price their home, prepare it for the market, market it to buyers, review and negotiate offers and manage the steps from an accepted offer to closing.

Market data note: figures are pulled and tracked by Trevor Landress from public records and market reports and are accurate as of the month stated.

Rules and official pages

CFPB: How should I use lender credits and points?