Points & Buydown Calculator

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.

Next steps

• Use the DSCR at Different Rates calculator to see how your DSCR shifts across rate scenarios.
• Check your total payment with the Mortgage Payment + DSCR calculator.
• Or get matched directly with lenders who will show you the actual point/rate tradeoff on your specific deal.