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Points & Buydown Calculator

See exactly how many months it takes for a rate buydown to pay for itself — and whether it makes sense at your planned holding period.

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Points & Buydown

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$

Principal borrowed

Typically 30

%

Par rate from lender

%

Rate after buying points

e.g. 1, 1.5, 2

%

Default 1% of loan

How long you plan to keep the loan

Results

Buydown pays off

Break-even in 40 months (3.3 yrs)

Upfront cost
$3,500
Payment without points
$2,387.62
Payment with points
$2,299.25
Monthly payment savings
$88.37
Total savings over 7 yrs
$7,423
Net benefit over 7 yrs
$3,923

A rate buydown trades upfront cash for a lower rate. The break-even is the point where accumulated monthly savings equal the upfront cost. If you sell or refinance before break-even, you lose money on the buydown.

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What are mortgage discount points?

Discount points are a form of prepaid interest. You pay a lump sum at closing — typically 1% of the loan amount per point — in exchange for a permanently lower interest rate. On a $350,000 DSCR loan at 7.25%, buying one point ($3,500) might buy the rate down to 7.00%. That 0.25% reduction saves roughly $58/month in principal and interest over a 30-year term.

Whether that $3,500 is worth it depends almost entirely on one question: how long do you plan to hold this loan?

The break-even math

The break-even formula is simple:

Break-even months = Upfront cost ÷ Monthly payment savings

In the example above: $3,500 ÷ $58 = 60 months (5 years). If you sell, refinance, or pay the loan off before month 60, the buydown costs you money on net. Every month after month 60 adds pure savings.

For a rental property, break-even is not about when you sell — it's about when you refinance. DSCR investors frequently refinance when rates drop or equity builds. A buydown with a 5-year break-even on a loan you refinance in 3 years is a net loss of roughly $1,260.

DSCR-specific buydown considerations

On DSCR loans, rate buydowns have an extra dimension beyond monthly savings: they can move your DSCR across a threshold. If a 0.25% rate reduction pushes your deal from 0.99 DSCR to 1.06 DSCR, you may unlock a better LTV, lower rate add-ons, and a wider lender pool. In some cases, the secondary benefits of crossing a DSCR tier are worth more than the accumulated monthly savings.

Run the scenario both ways: (1) no points, lower-tier DSCR pricing, and (2) one point, higher-tier DSCR pricing. On deals near a DSCR boundary, the blended economics often favor buying the point.

How many points should you buy?

The rate-per-point relationship is not linear. Buying 2 points typically produces less than twice the rate reduction of 1 point, because lenders price points on a diminishing curve. As a rough guide:

  • 0.5–1 point: Usually cost-efficient if hold period exceeds 4 years.
  • 1.5–2 points: Only worthwhile if break-even is under 36 months, or if crossing a material DSCR tier.
  • 2+ points: Rare on DSCR loans. The upfront capital is often better deployed as additional down payment, which improves DSCR more efficiently than rate buydowns at high point counts.

Alternatives to buying points

Before buying points, consider these alternatives that often deliver better economics on DSCR deals:

  1. Larger down payment. Each 5% reduction in LTV lowers your loan amount directly and typically moves DSCR by 0.06–0.08 — more impactful than a 0.25% rate cut on a tight deal.
  2. Interest-only structure. If the lender offers I/O, the payment reduction is larger than a rate buydown with a similar upfront cost. DSCR boost is immediate and applies every month of the I/O period.
  3. Lender shopping. Rate differences between DSCR lenders on the same deal can easily span 0.375–0.625%. Comparing 3+ lenders before committing is almost always more valuable than buying points from the first quote.

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Frequently asked questions

What is a mortgage points buydown?
Paying mortgage points — also called discount points — means paying a percentage of your loan amount upfront to permanently reduce your interest rate. One point equals 1% of the loan amount. On a $350,000 loan, one point costs $3,500 and typically buys down the rate by 0.25%. Whether it makes financial sense depends entirely on how long you keep the loan.
How do I calculate the break-even on a rate buydown?
Break-even months = upfront cost ÷ monthly payment savings. If buying one point costs $3,500 and reduces your payment by $58/month, break-even is 3,500 ÷ 58 = 60 months (5 years). If you sell, refinance, or pay off the loan before month 60, the buydown cost you money net. After month 60, every month adds to your net savings.
How many points should I buy on a DSCR loan?
On DSCR loans, the same break-even math applies as on any mortgage — but there's an added dimension: if buying a point moves your DSCR from 0.99 to 1.05, it can unlock a better LTV tier and lower your ongoing rate without needing to buy points at all. Run both scenarios. Sometimes a slightly larger down payment is more efficient than buying points.
What's a typical cost-per-point on a DSCR loan?
Generally 1% of the loan amount per point. Some lenders price fractional points (0.5 points = 0.5% of loan). The rate reduction per point varies by lender, market conditions, and loan program — typically 0.125% to 0.375% per point. Always ask the lender for the actual rate/cost tradeoff before assuming 0.25% per point.
Are points tax-deductible on investment properties?
Yes — on investment properties, points paid to obtain a mortgage are generally deductible as a business expense, but they must be amortized over the life of the loan (not deducted in full in year one, unlike on a primary residence). Consult a CPA for your specific situation.
What if I plan to refinance soon — should I still buy points?
Almost certainly not. If you expect to refinance within 2–3 years, a buydown with a 4–5 year break-even is a losing trade. The exception is if the rate reduction also crosses a DSCR threshold that provides meaningful lender benefits — but even then, a larger down payment usually achieves the same DSCR improvement more efficiently.
What is a temporary buydown vs a permanent buydown?
A permanent buydown reduces your rate for the full life of the loan (what this calculator models). A temporary buydown — such as a 3-2-1 or 2-1 buydown — reduces your rate only for the first 1–3 years, then reverts to the full rate. Temporary buydowns are more common on owner-occupied purchases; DSCR lenders typically offer permanent points only.
How do I know if a lender's points offer is competitive?
The key metric is the 'price of the rate' — how many dollars of upfront cost buy one basis point (0.01%) of rate reduction. A fair market deal is roughly 25–30 basis points of rate reduction per point. If a lender is offering only 0.125% of reduction for one full point (1% of loan), the pricing is unfavorable unless there are other compensating features.
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