Programs
Points & buy-down
Is buying the rate down worth what it costs today?
Illustrative example only — not a rate quote, not an APR offer, and not a commitment to lend.
The points pay for themselves after
3 yr 5 moPaying 1.000% of the loan to move the rate from6.75% to 6.38%costs $4,200 now and saves$104 a month. Keep the loan pastpayment 41 and you are ahead; sell, refinance or pay it off before then and you are not. An illustration produced by the numbers you typed — not a quote, and not a rate anyone has offered you.
On these numbers the points never pay back inside the term. Either the rate you entered after the buy-down is not lower than the rate before it, or the saving is too small to recover $4,200 in30 years. Lower the bought-down rate, or pay fewer points, and this page will find the month it turns over.
Cash out of pocket, with and without the points
Both lines are total cash paid on the loan as time passes. The dashed line starts higher — you handed over the cost of the points at closing — and then climbs more slowly, because the payment is smaller. Where they cross is the break-even. The view is trimmed to the years around the crossing so it is actually visible.
What each amount of points would have to buy
Five years is a common length of time to keep a loan before selling or refinancing. This table works backwards from that: for each amount of points, it shows the rate you would need to be offered for the cost to come back within sixty payments. It is built from your loan amount, term and starting rate, and nothing else. It is not a rate sheet, and none of these rates are on offer anywhere — they are the arithmetic thresholds your own inputs imply.
| Points | Cost today | Payment must fall by | Rate that does it | Payment at that rate |
|---|---|---|---|---|
| 0 points | $0 | nothing to recover | 6.750% | $2,724 |
| 0.5 points | $2,100 | $35 / mo | 6.624% | $2,689 |
| 1 point | $4,200 | $70 / mo | 6.498% | $2,654 |
| 1.5 points | $6,300 | $105 / mo | 6.371% | $2,619 |
| 2 points | $8,400 | $140 / mo | 6.243% | $2,584 |
Read a row as a test rather than a target. If the rate a lender really quotes you for that many points is below the rate in the fourth column, the points come back inside five years. If it is above, they do not.
The two numbers this page cannot know
A break-even for points is only as good as the pair of rates you feed it, and both of them come from outside this page.
- What a point actually buys. There is no fixed exchange rate between points and rate. How far a point moves your rate depends on the lender, the loan, the day and the market underneath it — which is why this page makes you type the bought-down rate instead of guessing one for you. A guessed one would be fiction dressed up as arithmetic.
- What else the cash could have done. The break-even above counts only the payments. It does not count what the money spent on points might have earned had it stayed invested, gone into a larger down payment, or simply stayed within reach as savings. Measured against a real alternative use of the cash, the true break-even is later than the month shown here.
What this page assumes
- You type both rates. The rate a given number of points actually buys is set by the lender and by the market on the day, and this page has no way to know it. Nothing here is a quote or a rate on offer.
- The break-even is the month the accumulated monthly saving has repaid the cost of the points. It ignores what that cash could have earned elsewhere, so it flatters the points.
- Points are assumed to be paid in cash at closing, not financed into the loan. Financing them changes the arithmetic entirely.
- The comparison holds the loan amount, the term and every other cost equal, and assumes both loans are fixed-rate, run to term, and are never refinanced or paid off early. Most loans are not kept for thirty years.
- Lender credits — the mirror image of points, where you take a higher rate in exchange for cash toward costs — are not modeled here.
- No tax treatment is modeled. Discount points may be deductible for some filers in some years; that is a question for a tax professional, not for a calculator.
- Only principal and interest appear on this page. Property tax, insurance, HOA dues and mortgage insurance are unaffected by a buy-down and are handled on the monthly payment calculator.
- Every figure is an illustration produced by the numbers you typed. This site is a demonstration for a fictional lender, Copperline Home Loans, which does not exist and cannot lend.
Talk it through
Send the numbers to a person
On a live site this is where the arithmetic on the points & buy-down calculator turns into a conversation. A loan officer would get what you enter here, along with the inputs already in the link.
This form is a demonstration and does not send anything. There is no server, no database and no third-party form service behind this page. Nothing you type is stored, transmitted or logged, and nobody will call you. If you want to see how the real thing would behave, fill it in — it validates properly and shows the confirmation.
A real enquiry would go to (720) 555-0139 or[email protected] — both invented for this demonstration.
Thank you — that is what would have happened.
A real site would have queued this enquiry and told you when to expect a reply. This one did not: your details were validated in the browser, shown back to you, and then discarded. Nothing left this page.