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Points & 2-1 Buydown Calculator
Paying discount points or taking a 2-1 buydown only pays off if you stay long enough. This mortgage points buydown calculator shows your upfront cost, monthly savings and the exact month you break even on your own timeline.
See how this works on a $400,000 loan — 3 real examples
You break even after
—
Upfront cost of points
$0
Monthly savings
$0
Lifetime savings
$0
Break-even crossover
Total buydown subsidy cost
$0
Year 1 payment
$0
Year 2 payment
$0
Year 3+ payment
$0
Stepped payment timeline
Year-by-year breakdownBreak-even & stepped schedule
How your points & 2-1 buydown break-even is calculated
Discount points. The upfront cost is simply the points bought times 1% of the loan:
cost = points% × loan · break-even = cost ÷ monthly saving
Each monthly payment is the standard fully-amortizing mortgage payment, computed at the rate with points and the rate without, over the full loan term. The difference is your monthly saving. Break-even is the first whole month at which accumulated savings cover the point cost (rounded up); if the “with points” rate is not actually lower, the savings are zero or negative and the points never pay off. Lifetime savings are the monthly saving across every month of the term, minus the upfront cost.
2-1 buydown. You pay as if the note rate were 2 points lower in year 1 and 1 point lower in year 2 (each floored at 0%), then the full note payment from year 3. The subsidy prefunded at closing is the sum of the twelve monthly gaps in each of the first two years:
subsidy = 12 × (note−yr1) + 12 × (note−yr2)
The loan itself always amortizes at the full note rate — the buydown only changes what you pay out of pocket, with escrow covering the rest. That is why the payment “shocks” back up in year 3, and why a permanent point purchase can be the better deal if you will stay in the home for many years. This tool does not model taxes; point deductibility is noted in the FAQ.
The same five-year bet, at three sizes
On a $400,000 loan at 7%, a point costs $4,000 and buys 0.25% off the rate — and every version pays for itself at nearly the same month.
The toe in the water: half a point
to break even5.0 years
- $2,000 up front buys a 6.875% rate and a $2,627.72 payment, $33.49 lighter than before.
- The fee is earned back at month 60 — a full five years of staying put.
- Held for all 30 years, the small check grows into $10,058 kept.
The smallest stake still faces the full five-year wait before it earns anything.
Load this example (opens in a new tab)The standard trade: one point
to break even5.0 years
- $4,000, double the half-point fee, lands a 6.75% rate and a $2,594.39 payment.
- The $66.82 monthly saving reaches break-even at the very same month 60.
- Over the full term it returns $20,054, close to double the half-point's $10,058.
Twice the wager, the same wait — the clock does not care how much you bet.
Load this example (opens in a new tab)All in: two points for 6.5%
to break even5.1 years
- $8,000 buys the lowest rate of the three, 6.5%, and the lightest payment, $2,528.27.
- Monthly relief of $132.94, roughly four times the half-point figure, pushes break-even back only to month 61.
- Seen through to year 30, the deal keeps $39,858 in your pocket, the most of the three.
Four times the money, the same five-year question: will you still be here?
Load this example (opens in a new tab)Illustrations only, not financial advice. Your own rate, taxes and insurance will differ — check with a qualified financial advisor before acting on any of this.
Points vs. 2-1 buydown, in plain English
- Points are permanent. One discount point costs 1% of the loan and buys down your rate for the life of the loan — so the payoff grows the longer you stay.
- Break-even is the whole game. Points only win if you keep the loan past the month your monthly savings repay the upfront cost; sell or refinance sooner and they lose money.
- A 2-1 buydown is temporary relief. It doesn’t change your rate — a pot of prepaid escrow covers part of the payment in years 1 and 2, then it’s gone.
- Mind the payment shock. The loan always amortizes at the full note rate, so the payment jumps in year 3 — lenders qualify you at that higher number for a reason.
- Match the tool to the plan. Buy points for a long stay and a permanently lower payment; take a buydown for early breathing room or when a seller/builder funds it.
- Taxes aren’t modeled here. Points on a primary home are often deductible as prepaid interest, which can shift the math — check with a tax professional.
Related calculators
Frequently asked questions
How much does one mortgage point cost?
One discount point costs 1% of your loan amount and is paid upfront at closing. On a $400,000 loan that is $4,000 per point. Each point you buy typically lowers your interest rate by about 0.125% to 0.25%, though the exact reduction varies by lender and day — always ask for your specific rate-per-point.
When do you break even on buying points?
You break even once your accumulated monthly payment savings equal the upfront cost of the points. Divide the point cost by the monthly saving: $4,000 of points saving $66 a month breaks even in about 61 months, or roughly 5 years. If you sell or refinance before that month, the points cost you money.
What is a 2-1 buydown and how does it work?
A 2-1 buydown temporarily lowers your mortgage payment for the first two years, and this 2-1 mortgage buydown calculator shows each year's payment. You pay as if your rate were 2 percentage points lower in year 1 and 1 point lower in year 2, then the full note rate from year 3 onward. A 3-2-1 buydown extends the same idea to three years — 3 points lower, then 2, then 1. The gap between the discounted payments and the note payment is prefunded into an escrow account at closing.
Who pays for a mortgage buydown?
Temporary buydowns are most often funded by the seller or homebuilder as a concession to close the sale, especially in slower markets. A buyer or lender can also fund one. Because the cost is a fixed subsidy rather than a permanent rate reduction, a seller-paid 2-1 buydown lowers your early payments at no cost to you.
Are mortgage points tax-deductible?
Discount points paid to buy down the rate on a mortgage for your primary home are generally deductible as prepaid mortgage interest, often in the year you pay them for a purchase, or spread over the loan term for a refinance. Rules and limits apply, so confirm your situation with a tax professional — this calculator does not model tax effects.
Should I buy points or take a temporary buydown?
Points make sense when you will keep the loan well past the break-even month, because the lower rate lasts the whole term. A 2-1 buydown makes sense when you want breathing room on early payments or expect rates to fall so you can refinance — and it is most attractive when someone else pays for it. Use both modes above to compare your numbers.
Disclaimer: these calculators are educational tools, not financial advice. They model your inputs with published formulas, but they cannot know your full situation — for decisions with real stakes, talk to a qualified professional. Formulas and defaults last reviewed .