Should you buy down your rate?
Paying discount points up front lowers your interest rate — but only pays off if you keep the loan long enough. Enter your numbers to see the break-even month and your net position over time.
Your loan
Example: 1.5 points at 1% each on a $400,000 loan costs $6,000 up front and cuts the rate by 1.5 × 0.25 = 0.375 points.
Your net position by how long you keep the loan
Net = monthly savings × months held − upfront points cost. Green means the buy-down has paid for itself.
| Holding period | Months | Saved on payments | Points cost | Net position |
|---|
How this works
Discount points are prepaid interest: you hand the lender money at closing in exchange for a lower rate for the life of the loan. Each point here costs a set percent of the loan amount and shaves a fixed amount off the rate.
- New rate = base rate − (points × rate cut per point), floored at 0%.
- Points cost = loan × (points × cost-per-point %).
- Monthly savings = payment at the base rate − payment at the bought-down rate.
- Break-even = points cost ÷ monthly savings, rounded up to whole months. Keep the loan past that point and the buy-down comes out ahead.
Simplified estimate. It ignores the time value of money (a dollar saved years from now is worth less than a dollar paid today) and any tax deductibility of points or interest. Real lender pricing is not linear — points rarely buy an exact 0.25% each, and pricing shifts daily with the market. Refinancing, selling, or extra principal payments all move your true break-even. Educational estimate, not financial advice; confirm actual point pricing with your lender.