If interest rates have you second-guessing a Novato move, you are not alone. Many buyers and move-up families are asking how to keep monthly payments comfortable without putting their plans on hold. The good news is you have several levers to shape your payment so it fits your budget and timeline.

In this guide, you will learn how points, temporary buydowns, adjustable-rate mortgages, and lender credits actually work, plus how they play out with Novato-sized price points. You will also get simple steps to compare options and choose the right path for your situation. Let’s dive in.

Why rate strategy matters in Novato

Novato sits inside a high-cost county, so many purchases approach or exceed conforming loan limits. That can push loans into jumbo territory, which may come with different rates and stricter requirements. The product you choose can influence both approval and monthly cost.

Property taxes also shape the real monthly number you will live with. In California, the baseline is about 1% of assessed value each year, and Marin adds local assessments. When you estimate affordability, look beyond principal and interest to include property tax, insurance, potential HOA dues, and mortgage insurance if your down payment is under 20%.

Four levers to shape your payment

Mortgage points explained

A discount point is an upfront fee equal to 1% of the loan amount that typically reduces your interest rate. One point often lowers the rate by roughly 0.125% to 0.25%, but the exact price is lender and borrower specific. The tradeoff is higher cash at closing in exchange for lower principal-and-interest each month.

A helpful metric is the breakeven period. Divide the cost of the point by the monthly savings to see how many months it takes to come out ahead. If you expect to keep the loan beyond that point and you have ample reserves, points can be smart.

Example with a $720,000 loan: One point costs $7,200. If that lowers a 6.50% rate to 6.25%, the payment drops to about $4,434 per month, a savings of roughly $119. Breakeven is about 60 months. If you plan to move or refinance sooner, paying points may not pencil.

Temporary buydowns: near-term relief

A temporary buydown lowers the effective rate for the first 1 to 2 years, then the payment resets to the permanent note rate. Common versions are a 2-1 buydown and a 1-0 buydown. The buydown subsidy can be paid by you, the seller as a concession, or via a program. Lenders may escrow the subsidy and use either the note rate or the reduced payment for qualification, so confirm their approach.

Example with a $720,000 loan at a 6.50% base rate: A 2-1 buydown sets Year 1 at roughly 4.50% with a payment near $3,648 and Year 2 at about 5.50% with a payment near $4,087. That is about $16,452 in total first-two-year payment reduction. If the cost to fund the buydown is below that number, it can be attractive, especially if you expect income to rise.

ARMs: lower start, future reset

Adjustable-rate mortgages like 5/1, 7/1, and 10/1 offer an initial fixed period followed by annual adjustments tied to an index plus a margin. ARMs often start with a lower rate than a 30-year fixed, which can help you qualify or free up cash flow. The risk is a higher payment after the initial period, so it is essential to understand caps and worst-case resets.

Example with a $720,000 loan: A 5/1 ARM at 5.00% starts near $3,864 per month versus about $4,317 on a 6.00% fixed, a savings of roughly $453. If the ARM later adjusted to 8.00% in a high-rate scenario, the payment could rise to about $5,283. ARMs work best if your timeline is shorter or if you are comfortable with potential increases.

Lender credits vs. paying points

Some lenders offer credits that reduce closing costs if you accept a higher interest rate. Credits can be helpful if you want to conserve cash for reserves, improvements, or furniture. Paying points does the opposite. It raises upfront cost but reduces the monthly payment. Ask for side-by-side estimates that show cash to close and a 3 to 7 year comparison so you can see the breakeven clearly.

How these options change a Novato payment

Rate changes move monthly principal-and-interest more than many buyers expect. Using a $720,000 loan on a 30-year fixed:

• 6.50% is about $4,553 per month.
• 6.00% is about $4,317 per month.
• 5.50% is about $4,087 per month.

That is a swing of roughly $466 from 6.50% to 5.50% before taxes, insurance, HOA, or mortgage insurance. To estimate your full monthly payment, add property tax at roughly 1% of price per year divided by 12, plus your insurance, any HOA dues, and PMI if applicable.

Move-up buyers and jumbo loans

Move-up purchases often involve larger loans that may enter jumbo territory. Jumbo programs can require higher credit scores, more reserves, or larger down payments, and points on bigger balances cost more.

Example with a $1,320,000 loan: At 6.50%, principal-and-interest is about $8,346 per month. At 6.00%, it is near $7,912, a savings of roughly $434. One point on this loan is $13,200, so breakeven timelines can stretch unless the rate drop is meaningful.

If you need to buy before you sell, ask your lender about qualifying with both mortgages and what that means for your rate and cash flow. In a balanced or slower market, you may also negotiate for seller-paid credits or a temporary buydown to offset near-term costs.

Choose the right path in five steps

1. Clarify your horizon

• How long do you expect to keep this home and loan? Short timelines often favor ARMs, temporary buydowns, or lender credits to reduce upfront costs.

2. Protect your reserves

• Keep an emergency cushion. In a high-cost area, holding cash may be more valuable than buying points if the breakeven is years out.

3. Price the options with a lender

• Ask for quotes that show: rate with no points, rate with one point, a 2-1 buydown option, and a lender-credit option. Request cash-to-close and monthly payments for each.

4. Confirm the fine print

• For ARMs: index, margin, caps, adjustment schedule, and any floor rate.
• For buydowns: who pays, whether funds are escrowed, and what payment the lender uses for qualification.
• For jumbo: required credit score, down payment, reserves, and how point pricing differs from conforming.

5. Calculate breakeven and stress test

• Compare breakeven months for points versus your expected timeline. Run a worst-case ARM reset using the caps. Add realistic property tax, insurance, HOA, and PMI estimates to get to a true monthly number.

Quick guide to when each tool fits

• Consider points if you expect to keep the loan longer than the breakeven period and you have strong cash reserves.
• Consider a 2-1 or 1-0 buydown for short-term relief, especially if you expect higher income in the next 1 to 2 years or if a seller can fund the subsidy.
• Consider an ARM if your hold period is shorter or if you can manage potential payment increases after the fixed period.
• Consider lender credits if cash to close is your main constraint and the slightly higher payment still fits your budget.

Work with a local guide

Your strategy should match both your life and Novato’s market dynamics. A clear plan can improve affordability, strengthen your offer, and help you feel confident about next steps. If you want a consultative walkthrough of scenarios and how to structure an offer that supports your goals, reach out to the Tam Home Team. We combine neighborhood-level knowledge with thoughtful guidance so you can move forward with clarity.

FAQs

What are mortgage points for Novato buyers?

• Mortgage points are upfront fees equal to 1% of the loan that typically reduce your rate, with value determined by the monthly savings and breakeven versus your expected timeline.

How does a 2-1 buydown lower my first-year payment?

• A 2-1 buydown reduces your rate by about 2% in Year 1 and 1% in Year 2, then reverts to the note rate, providing near-term relief that can be funded by you or negotiated as a seller concession.

Are ARMs a good idea for a Novato purchase?

• ARMs often start with a lower rate and payment, which helps near term, but they can increase after the fixed period, so you should review caps and worst-case resets against your hold period.

How do property taxes affect my monthly payment in Marin?

• California’s baseline is about 1% of assessed value per year and Marin adds local assessments, so include this plus insurance, HOA, and PMI to estimate your full monthly cost.

What is the breakeven on buying one point for a $720,000 loan?

• If one point at $7,200 lowers the payment by about $119 per month, breakeven is roughly 60 months, so it makes more sense if you plan to keep the loan longer than 5 years.

Can a Novato seller pay for a buydown or points?

• Yes, seller-paid concessions are possible and often used for temporary buydowns or points, subject to lender rules and concession limits, and depend on market conditions and negotiation.