Calculator Inputs
Example Data Table
Sample scenarios show how cost and rate reductions influence savings. Values are illustrative and not tied to live lender pricing.
| Loan Amount | Term | Original Rate | New Rate | Upfront Cost | Monthly Savings | Break-even |
|---|---|---|---|---|---|---|
| $300,000 | 30 years | 6.50% | 5.75% | $3,000 | $149 | 21 months |
| $450,000 | 30 years | 7.00% | 6.25% | $6,750 | $211 | 32 months |
| $250,000 | 15 years | 6.00% | 5.50% | $2,500 | $66 | 38 months |
Formula Used
- Monthly payment: PMT = P × r ÷ (1 − (1 + r)−n), where r = APR/12 and n is months.
- Buydown cost: Cost = Loan × (Points ÷ 100), or a flat quoted amount.
- Monthly savings: Savings = PMT(original) − PMT(new).
- Total interest: sum of monthly interest across the amortization schedule.
- Interest savings: Interest(original) − Interest(new).
- Net savings: Interest savings − Upfront cost.
- Break-even months: ceil(Upfront cost ÷ Monthly savings) when savings are positive.
How to Use This Calculator
- Enter the loan amount, term, and original interest rate.
- Choose whether you know the new rate or the reduction.
- Enter the buydown cost using points or a flat amount.
- Add any other buydown fees if they apply.
- Set a holding period to model refinance or sale timing.
- Press calculate to see payments, break-even, and net savings.
- Use CSV or PDF exports to compare scenarios later.
Buydown pricing and upfront economics
A permanent buydown exchanges upfront cost for a lower note rate. Points are priced as a percent of principal, so larger loans magnify the dollar cost quickly. A 1.00 point charge on a 300,000 loan equals 3,000 before other fees. Your net value depends on how much interest the lower rate prevents over time.
Payment impact and monthly cash flow
Lowering the rate reduces the fixed payment under standard amortization. The monthly difference improves affordability, debt-to-income ratios, and reserve planning. Even small reductions can matter: a 0.75 point rate drop on a 30-year term can create three-digit monthly savings on common balances. That cash flow can be redirected to extra principal, investments, or emergency liquidity. For example, applying the monthly savings as extra principal can shorten payoff and increase equity, amplifying interest savings beyond the headline payment reduction over many years.
Break-even timing using real schedules
Break-even is the month when cumulative savings surpass the upfront cost. This calculator estimates break-even using both payment differences and month-by-month interest allocation, not a simple annual shortcut. If break-even falls beyond your expected holding period, the buydown may function more like prepaid interest than a true savings strategy.
Holding period and refinance sensitivity
Most borrowers refinance or sell before full term, so the holding period view is critical. Compare interest paid through your expected months, then subtract the full upfront cost to see period net savings. If rates may fall soon, test shorter holding periods. If rates may rise, longer holding periods typically strengthen the buydown case.
Decision checklist and documentation outputs
Use exports to document lender quotes and scenario assumptions. Confirm whether the buydown is borrower-paid, seller-paid, or lender-credit funded, and whether it changes APR disclosures. Review fees that are included in points versus itemized charges. When net savings are positive and break-even is comfortably before your exit horizon, a permanent buydown can be a disciplined, transparent hedge against payment risk.
FAQs
What is a permanent buydown?
A permanent buydown is an upfront charge that purchases a lower interest rate for the full loan term. It reduces the required payment and total interest, but the value depends on how long you keep the loan.
How do points convert to dollars?
Points are a percentage of the loan amount. One point equals 1% of principal, so 0.75 points on 400,000 equals 3,000. Add any lender fees to estimate the total upfront cost.
Does the buydown change the loan balance?
Not by itself. The buydown changes the note rate used for payment and interest. If you finance the cost into the loan, the principal increases, which can reduce or delay the savings.
Why can break-even differ from simple monthly savings?
Payment savings are usually steady, but interest savings vary each month as the balance declines. This calculator compares two full amortization schedules and subtracts upfront cost, producing a more realistic break-even estimate.
What if I refinance or sell early?
If you exit before break-even, you may not recover the upfront cost. Use the holding period view to estimate period net savings and compare alternatives like lender credits, smaller points, or a temporary buydown.
Should I pay points or take a higher rate?
Compare net savings at your expected exit date. Paying points can help when you plan a long hold and want stable cash flow. A higher rate with credits may fit short holds or uncertain refinancing plans.
Notes
This tool assumes a standard fixed-rate amortization schedule. Some loans use different day-count conventions, escrow rules, or rounding methods. Confirm exact terms with your lender.