Should You Pay Mortgage Points or Buy Down Your Rate in the Florida Keys?

Paying mortgage points or setting up a rate buydown is one of the most common ways Florida Keys buyers lower their monthly payment when mortgage rates are hovering near 7 percent, and whether it is actually worth it comes down to one question: how long you plan to keep the loan. This guide explains how discount points and temporary buydowns work in 2026, who can pay for them, the break-even math on a typical Keys loan, and when a lender credit or a lower offer price beats a buydown.

If you are newer to how rates and lender pricing work, my mortgage rates explained guide covers the full mechanics in plain language. This article is specifically about the lever you actually control: whether to pay extra at closing to lower your rate, and whether a seller-funded buydown is a good deal for your purchase.

Why Buydowns Are Everywhere Again in 2026

Rates are what make buydowns popular again. The Federal Reserve raised its benchmark rate on September 16, 2026, and according to Freddie Mac's weekly survey the average 30-year fixed rate climbed to 6.95% for the week ending September 17, with the 15-year at 6.26% and jumbo pricing jumping to roughly 7.03% in industry data. Forecasters expect the 30-year to hold in the mid-6% to 7% range through the rest of the year, which puts the focus squarely on payment. My recap of the September rate move walks through where rates landed by program.

At these levels, a financed buyer of an $800,000 Keys home is looking at roughly $5,300 a month in principal and interest at the average rate, before taxes and the flood and wind insurance that are part of every Keys payment. Buyers want a lower payment, and sellers in a market with fewer cash buyers want to keep deals alive, so rate buydowns have come back as the compromise. Industry research through 2026 found that nearly half of home sellers were offering concessions, with rate buydowns among the most common incentives, and Fannie Mae and Freddie Mac updated their buydown disclosures partly because the instruments have become more popular. In the Keys, where most inventory is resale rather than new construction, that usually means negotiating a concession into the contract rather than getting one from a builder.

The Two Kinds of Buydowns

There are two very different things people mean when they say "buying down the rate," and they work differently:

Discount Points: A Permanent Rate Reduction

A discount point is prepaid interest you buy at closing. One point costs 1 percent of the loan amount and typically lowers your rate by about a quarter of a percentage point, sometimes a bit less depending on the lender and the day. On an $800,000 loan, one point is $8,000. On a loan near Monroe County's median of roughly $961,000, one point is about $9,600, and two points on a $1.2 million jumbo runs about $24,000.

The key word is permanent. The lower rate applies for the entire life of the loan, so the longer you keep the mortgage, the more the points pay for themselves. Points also show up as an explicit charge on your Loan Estimate, labeled "points" in the origination section, so you can compare them directly between lenders.

Temporary Buydowns: A Payment Subsidy for the First Few Years

A temporary buydown such as a 2-1 or 3-2-1 does not change your note rate at all. It subsidizes your payment for the first one, two, or three years while the note rate stays where it is. With a 2-1 buydown, your payment is calculated as if the rate were 2 percent lower in year one and 1 percent lower in year two, then reverts to the full note rate in year three. A 3-2-1 steps down 3 percent, then 2 percent, then 1 percent over the first three years.

The money that covers the difference sits in a buydown account funded at closing, usually by the seller, and the lender draws from it to make up the gap between your subsidized payment and the full payment. The borrower never gets the cash; the account just tops up your early payments. Two rules catch people off guard:

• You are qualified at the full note rate, not the subsidized rate. Fannie Mae's selling guide requires borrowers to be underwritten at the note rate, so a 2-1 buydown does not help you qualify for a larger loan. It only changes cash flow after closing.
• The payment jumps in year three. If you are still in the home, your payment steps up to the real note rate, so you need to be able to absorb that increase.

On an $800,000 loan at 6.95%, a 2-1 buydown cuts the year-one payment by roughly $1,000 a month and the year-two payment by roughly $525 a month, and funding the account costs about $18,600. That is a big number, which is why temporary buydowns almost always come from a seller concession rather than your own cash.

The Break-Even Math on Discount Points

Here is the calculation that matters for one point on an $800,000 30-year loan:

At about five years, the monthly savings have paid back what the point cost, and everything after that is money in your pocket. If you plan to keep the loan for seven years or longer, buying points is generally a reasonable move. If you might sell or refinance within three to five years, the point usually does not pay for itself, and you are better off with the money in your pocket or as a cash-to-close cushion. Points also increase your closing costs, so run them through your full closing costs budget before you commit.

Who Pays for a Buydown?

The funding can come from several places, and each changes the analysis:

• You, at closing. Paying points from your own funds makes sense only when the break-even lands well inside your expected time in the home.
• The seller, through a concession. This is the most common source in the resale-heavy Keys market. The seller credits money toward your closing costs, and you use it to fund a permanent or temporary buydown. Conventional loans cap seller concessions on a primary residence at 9 percent of the purchase price with a larger down payment, 6 percent in the middle range, and 3 percent with a small down payment. On second homes and investment properties the cap drops to about 2 percent, which matters in the Keys, where so many buyers are purchasing a second home. FHA allows a flat 6 percent for owner-occupied purchases, and a 2-1 buydown is available on FHA purchases, though not on FHA refinances.
• The lender, through a credit. A lender credit is the mirror image of points: you accept a higher rate, and the lender pays some or all of your closing costs. It is the right tool when you expect to hold the loan a short time and would rather not pay costs upfront.
• A builder. In markets with heavy new construction, builders routinely advertise 2-1 buydowns. There is very little new construction in the Keys, so this is rare here; your negotiating lever is the seller of the resale home.

One common confusion: a seller concession and a price reduction are not the same thing. A concession caps out at the limits above, while a price reduction lowers your loan amount permanently and has no cap. If a seller offers you a choice between a credit toward a buydown and a lower price, run both numbers through the loan math before deciding, and remember a concession does not reduce what you finance.

What a Buydown Does Not Do

• It does not help you qualify. Underwriting uses the full note rate for temporary buydowns, so a 2-1 does not increase the loan amount you are approved for.
• It does not reduce the price or your loan balance. A buydown changes payments, not debt. For some buyers, negotiating a lower price outright is worth more than a buydown of the same dollar amount.
• It is not free money on a refinance. Points on a refinance are real costs with the same break-even math, and for tax purposes they are generally amortized over the life of the new loan rather than deducted in one year. My tax write-offs guide covers mortgage points in more detail, though for tax advice you should talk to a CPA.
• It does not survive a rate change. Points are part of your rate lock. Lock the rate and the points together, and confirm in writing what your point cost is for the locked rate.

How Points Play Out on Keys-Sized Loans

Because loan balances in Monroe County are large, both sides of the points equation get bigger. A quarter-point savings is worth about $134 a month on an $800,000 loan, roughly $166 a month on a $1 million loan, and about $200 a month on a $1.2 million jumbo. The cost scales the same way, so the five-year break-even holds up across loan sizes, but the cash required at closing is much larger here than it would be in a market with $300,000 median prices. That is a real trade-off: many Keys buyers prefer to keep cash for insurance and reserves rather than sink it into points.

The loan program matters too. Conventional loans give you the most control over points and credits. FHA loans allow seller-paid buydowns within the 6 percent cap. VA loans already carry the lowest pricing on the board, so a buydown is rarely the first lever for an eligible veteran; VA also restricts what sellers can contribute. And on jumbo loans, point pricing varies a lot more between lenders, so comparing the rate-and-points grid side by side is especially important. My jumbo requirements guide covers the qualification side of that picture.

How to Compare Points Across Lenders

The single best question to ask any lender: "What is your rate and points grid for today?" You want the same day, the same loan program, and the same lock period, with three or four options such as:

Compare the monthly payment and the total closing costs for each option, look at the APR, which folds upfront costs into the rate, and ask whether the points are refundable if the deal falls apart. My Florida Keys mortgage calculator lets you see taxes, flood insurance, wind coverage, and HOA dues on top of principal and interest, which is the honest picture of what any rate actually costs you each month.

Frequently Asked Questions

Ready to Run the Numbers?

You do not have to guess whether points are worth it. I will model your payment at no points, one point, and two points, and lay out what a seller-funded temporary buydown would do to your first two years of payments if a concession is on the table, along with the break-even for each option. That is the honest way to decide, whether you are buying in Key Largo, Islamorada, Marathon, Key West, or anywhere between. No pressure, no jargon, just the math.

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