Permanent Buydown Calculator

Analyze the cost-effectiveness of paying points to permanently lower your mortgage interest rate. Calculate your breakeven point to see if a buydown is right for you.

Loan Details

Rate Options

Buydown Cost

Related Mortgage & Finance Calculators

What is a Permanent Mortgage Buydown?

A mortgage buydown is a financing strategy where an upfront payment is made to the lender to reduce the interest rate on a loan. In a **permanent buydown**, this rate reduction lasts for the entire life of the loan. The upfront payment is made in the form of **"discount points,"** where one point typically costs 1% of the total loan amount.

For example, a lender might offer you a loan at 7.0%, or you could pay 2 points ($4,000 on a $200,000 loan) to lower the rate to 6.5% for the entire 30-year term. This calculator helps you determine if that upfront cost is worth the monthly savings.

How to Use the Buydown Calculator

  1. Enter Loan Details: Input your total loan amount and the full loan term in years.
  2. Enter Rate Options: Input the original interest rate offered (without points) and the lower rate offered after paying points.
  3. Enter Buydown Cost: Input the total upfront cost to buy down the rate. This is usually expressed in "points," where 1 point equals 1% of the loan amount.
  4. Calculate: See your monthly savings, the total cost of the buydown, and most importantly, the breakeven point in months.

Frequently Asked Questions (FAQ)

When is buying down the rate a good idea?

A buydown makes the most financial sense when you plan to stay in the home for a long time, well past the **breakeven point**. If you sell or refinance the home before you reach the breakeven point, you will have lost money on the upfront cost. It is a bet that you will keep the loan long enough for the monthly savings to outweigh the initial fee.

What is a "temporary buydown" (like a 2-1 buydown)?

Unlike a permanent buydown, a temporary buydown only reduces the rate for the first few years of the loan. A common example is a "2-1 buydown," where the rate is reduced by 2% for the first year and 1% for the second year, before returning to the full rate for the remainder of the term. This is often offered by home builders as an incentive.