Points & Rate Buydown Calculator

Discount points are a permanent buydown. You pay a fee at closing (each point is typically 1% of the loan amount) and the rate is lowered for the life of the loan. A temporary buydown (2-1 or 3-2-1) lowers the rate only for the first 2 or 3 years, then it returns to the note rate. Temporary buydowns are usually funded by a seller or lender credit rather than by the borrower.

A common rule of thumb is about 0.25% per point, but the actual reduction varies by lender, program, and market. This calculator lets you adjust the reduction per point so you can model a specific quote.

When you plan to keep the loan longer than the break-even period. If the break-even is 48 months and you expect to move or refinance in 3 years, the points probably don't pay off. If you plan to stay for a decade, they usually do.

Most temporary buydowns are funded by a seller credit (common in buyer-friendly markets) or by the lender. The full subsidy is collected at closing and deposited in an escrow account that covers the rate difference each month during the buydown period.

Points paid on a primary-residence purchase are generally deductible as mortgage interest in the year paid, subject to IRS rules. Refinance points are typically deducted over the life of the loan. Talk to a tax professional for your situation. This calculator does not model tax benefits.