Buydown breakeven calculator
Compare payments with and without the buydown; compute how many months until the monthly savings recoup the upfront cost.
Upfront cost of the rate buydown (typically 1-2% of the loan amount).
Breakeven
40.2 months
That's 3.4 years to recoup the buydown cost.
Monthly savings
$106
Without: $2,792 · With: $2,686
Life-of-loan net savings
$33,787
If borrower keeps the loan to maturity, after buydown cost.
A buydown is worthwhile when the borrower's expected hold period exceeds the breakeven. Refinance and prepayment risk can shorten the effective hold; weigh accordingly.
A permanent rate buydown is a one-time fee paid at close in exchange for a lower note rate for the life of the loan. The borrower benefits if they keep the loan long enough for the monthly savings to exceed the buydown cost.
Refinance and prepayment risk shorten the effective hold. Consider both when advising on a buydown decision — the breakeven number is necessary but not sufficient.