Should You Buy Down Your Mortgage Rate?

A Guide for Hudson, WI and Twin Cities Homebuyers

If you’re buying a home in Hudson, WI, Minneapolis, St. Paul, or anywhere across the Twin Cities metro, chances are you’ve heard of “buying down your mortgage rate.”

But what does that really mean? And more importantly—is it worth it?

As a local real estate agent serving Western Wisconsin and the Twin Cities, I’ve helped plenty of buyers decide whether a mortgage rate buydown makes financial sense for their situation. Here's what you need to know.

What Is a Mortgage Rate Buydown?

Buying down your mortgage rate means paying discount points upfront to secure a lower interest rate on your loan.

Here’s the typical breakdown:

• 1 point = 1% of your loan amount

• Each point usually reduces your interest rate by about 0.25%

• This is prepaid interest that lowers your monthly mortgage payment

Example:

You're buying a $400,000 home in Hudson, WI, and taking out a $320,000 mortgage.
Buying one point would cost $3,200, and could lower your rate from 7.25% to 7.00%, depending on market conditions.

Benefits of Buying Down Your Rate

1. Lower Monthly Payments

Even a small drop in your interest rate can lower your monthly mortgage payment—leaving more room in your budget for:

• Home improvements

• Travel and lifestyle goals

• Emergency savings or investing

This can be especially valuable in higher-priced areas like Woodbury or Stillwater, where mortgages tend to be larger.

2. Long-Term Savings

If you plan to stay in your home for several years, buying down your rate could save you tens of thousands of dollars over the life of your loan.

3. Budget Stability

With a fixed-rate mortgage, buying down your rate locks in a predictable monthly payment, which can make long-term budgeting easier—especially for growing families in communities like Hudson or Eagan.

Downsides to Consider

1. Higher Upfront Costs

Buying points means more cash needed at closing. If you're already stretched for:

• Down payment

• Closing costs

• Moving or furnishing expenses

…this might not be the right time to invest in a buydown.

Tip: Don’t drain your emergency fund just to get a lower rate. Sometimes keeping that cash available is the smarter move.

2. Break-Even Timeline

Buying down your rate only makes sense if you plan to stay in the home long enough to recoup the upfront cost.

• Shorter stays (3–5 years or less) often won’t justify the cost

• Use a mortgage calculator or talk to your lender to determine your break-even point

3. Not All Loans Allow It

Some loan types—like FHA, VA, or certain first-time buyer programs—limit how many points you can buy.

Be sure to ask your lender or mortgage broker about what’s allowed with your loan type.

Is a Rate Buydown Right for You?

This decision depends on your:

• Loan amount and interest rate

• How long you plan to stay in the home

• Cash available at closing

• Long-term financial goals

As a local expert in Hudson WI real estate, I can help you weigh the numbers and connect you with trusted local lenders who’ll walk you through every option.

Real Talk from a Local Agent

In our market—whether you're moving to Hudson, relocating to St. Paul, or upgrading in Lake Elmo—interest rates are constantly shifting.
Buying down your rate can be a powerful tool, but it has to fit into your bigger financial picture.

I've seen clients benefit greatly when they’re planning to stay long-term and have some flexibility with their cash. I've also seen buyers skip the buydown and instead use that money to furnish or renovate their new place—which can be just as valuable.

Let’s Talk About Your Buying Strategy

Whether you're just starting your home search or already pre-approved, I’m here to help you make smart, confident decisions.

Ready to make a move in Hudson or the surrounding area?
Let’s talk! Contact The Johnson Group at Coldwell Banker Realty today to start your journey.

📞 Call us today at 651-333-7656
🌐 Or visit www.johnsonhomegroup.com
📍 Serving Hudson, WI and the greater Twin Cities metro area

Written by Mark Johnson, REALTOR® and owner of The Johnson Group at Coldwell Banker Realty. With over 20 years of experience helping clients across Hudson, WI and the Twin Cities, Mark is passionate about delivering expert real estate guidance with a personal touch.