Calculate the break-even point of paying points for a lower rate.
Standard Monthly Payment:
$0.00
Discounted Monthly Payment:
$0.00
Monthly Savings:
$0.00
Upfront Buydown Cost:
$0.00
Break-Even Period
0 Months
(0.00 Years)
Understanding Rate Buydowns
A mortgage rate buydown is a strategy where you pay upfront fees (often called "points") to reduce the interest rate on your loan. Each point typically costs 1% of the total loan amount and usually lowers your rate by about 0.25%.
How to Use This Calculator
Loan Principal: The total amount you are borrowing from the lender.
Standard Annual Rate: The interest rate offered to you without any points.
Discounted Annual Rate: The lower rate you will receive after the buydown.
Buydown Cost: Expressed as a percentage of the loan (e.g., 2 points = 2%).
Is a Buydown Worth It?
The "Break-Even Point" is the most critical metric. This is the number of months it takes for your monthly savings to cover the upfront cost of the buydown. If you plan to keep your mortgage for longer than the break-even period, the buydown will save you money over the life of the loan. If you plan to sell or refinance before the break-even point, you will likely lose money by paying for the rate reduction.
Realistic Example
Imagine a $400,000 loan at a 7.0% interest rate. If you pay 2 points ($8,000) to lower the rate to 6.5%, your monthly payment drops by approximately $135. Your break-even point would be roughly 59 months (just under 5 years). If you stay in the home for 30 years, you would save over $48,000 in interest total.
function calculateBuydown() {
var loan = parseFloat(document.getElementById('loanAmount').value);
var term = parseFloat(document.getElementById('loanTerm').value);
var rateA = parseFloat(document.getElementById('baseRate').value);
var rateB = parseFloat(document.getElementById('boughtRate').value);
var points = parseFloat(document.getElementById('pointsCost').value);
if (isNaN(loan) || isNaN(term) || isNaN(rateA) || isNaN(rateB) || isNaN(points)) {
alert("Please enter valid numeric values for all fields.");
return;
}
// Monthly interest rates
var mRateA = (rateA / 100) / 12;
var mRateB = (rateB / 100) / 12;
var n = term * 12;
// Monthly Payments Formulas: P * [i(1 + i)^n] / [(1 + i)^n – 1]
var payA = (loan * mRateA * Math.pow(1 + mRateA, n)) / (Math.pow(1 + mRateA, n) – 1);
var payB = (loan * mRateB * Math.pow(1 + mRateB, n)) / (Math.pow(1 + mRateB, n) – 1);
var monthlySavings = payA – payB;
var totalCost = loan * (points / 100);
var breakEvenMonths = totalCost / monthlySavings;
var breakEvenYears = breakEvenMonths / 12;
// Update UI
document.getElementById('standardPay').innerText = "$" + payA.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('discountPay').innerText = "$" + payB.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlySavings').innerText = "$" + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('upfrontCost').innerText = "$" + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (monthlySavings > 0) {
document.getElementById('breakevenPeriod').innerText = Math.ceil(breakEvenMonths) + " Months";
document.getElementById('breakevenYears').innerText = "(" + breakEvenYears.toFixed(2) + " Years)";
} else {
document.getElementById('breakevenPeriod').innerText = "N/A";
document.getElementById('breakevenYears').innerText = "(No savings detected)";
}
document.getElementById('buydownResult').style.display = 'block';
}