What Is a Buy-Down Points Calculator?

A buy-down points calculator works out whether paying discount points at closing is worth the cost. One point equals one percent of the loan amount, paid upfront in exchange for a permanently lower interest rate. Because the fee is paid immediately but the benefit arrives month by month, the decision turns on a single question: how long will you keep this loan?

The calculator answers that by computing the break-even month, which is the point at which the accumulated monthly savings equal the cost of the points. Hold the loan longer than that and the points produce a genuine return; sell or refinance before it and the fee is money spent for nothing. That is why the expected holding period matters more than the size of the rate cut.

How the Break-Even Is Calculated

The cost of the points is the loan amount multiplied by the number of points and divided by one hundred. The bought-down rate is the base rate less the number of points multiplied by the reduction the lender offers per point. Payments at both rates come from the standard amortisation formula: the loan amount multiplied by the monthly rate, divided by one minus the quantity one plus the monthly rate raised to the negative number of payments.

Subtracting the lower payment from the higher one gives the monthly saving, and dividing the cost of the points by that saving gives the number of months needed to recover the fee. Multiplying the monthly saving by the expected holding period and subtracting the cost produces the net benefit, which is the figure to compare against simply keeping the cash.

Understanding Your Results

The primary card reports the monthly payment saving, the bought-down rate and the cost of the points. The three statistics beside it give the break-even period, the net benefit over your expected holding period and the return on the points cost. The breakdown table sets out both rates, both payments, the fee, the monthly saving and the total saving over the hold period.

Summary Statistics collects the loan amount, points cost, both payments, the lifetime interest at each rate and the difference between them, along with the exact break-even month. Two practical notes: the second point usually buys less rate reduction than the first because pricing grids are not linear, and points on a refinance are generally deducted over the loan's life rather than in the year paid. Confirm the actual pricing grid with the lender before committing.