Mortgage Buydown vs Refinance vs Extra Payments: Which Saves More in 2026?
If you own a home, you have three primary levers to reduce total mortgage cost: a temporary rate buydown, a refinance, or extra principal payments. Each can be the best choice depending on timing, cash flow, and how long you plan to stay.
Option 1: Temporary Rate Buydown
A buydown lowers your rate for the first one to three years by paying upfront points, often with seller credits. It is most useful when you expect rising income or plan to refinance later.
Good fit if:
- You need short-term payment relief.
- You expect your income to rise within 12 to 36 months.
- The seller is offering credits that would otherwise go unused.
Option 2: Refinance
Refinancing replaces your existing loan with a new one. It works best when the new rate and terms produce meaningful monthly savings.
The key math is the break-even point:
Break-even months = Closing costs / Monthly savings
If you plan to stay beyond the break-even period, a refi can win. Use the Mortgage Calculator to compare scenarios.
Option 3: Extra Principal Payments
Extra payments reduce your balance faster, shorten the loan term, and lower total interest. It is effectively a guaranteed return equal to your mortgage rate.
Good fit if:
- You already have a low rate and do not want closing costs.
- You want flexibility, since you can stop extra payments at any time.
- You are comfortable tying up cash in home equity.
A Simple Decision Framework
- How long will you stay in the home? Short stays favor buydowns or extra payments over refi closing costs.
- Is your current rate already low? If yes, extra payments may be the cleanest win.
- Do you have seller credits available? If yes, a buydown can turn credits into real savings.
- Is your income expected to change? A buydown can bridge a short-term cash gap.
- Are you considering moving or renting instead? Re-check the numbers with the Rent vs Buy tools.
Related Tools and Reads
- Mortgage Calculator to compare payment scenarios.
- Housing Decision Calculator to model rent vs buy decisions.
- Real Estate Calculators for broader housing math.
- Homeowner Tax Deductions in 2026 for itemizing considerations.
- How Federal Income Tax Actually Works if you are modeling itemized deductions.
A good housing decision is a math decision. Use the calculators to compare realistic scenarios and choose the option that fits your timeline and cash flow.