One point equals 1% of the loan amount.
Buydown math
Mortgage buydown break-even examples
Break-even turns a lower-rate promise into a decision. Divide the extra upfront cost by the monthly savings, then compare that result with how long you realistically expect to keep the mortgage.
Permanent point break-even
Added upfront cost ÷ monthly principal-and-interest savings = break-even months
Use lender-controlled cost differences, not taxes, insurance, or escrow amounts that do not buy the lower rate.
Example 1: one point on a $400,000 loan
Illustrative principal-and-interest difference.
$4,000 divided by $75, rounded up.
If you expect to refinance or sell in three years, the point cost would not be recovered in this example. If you expect to keep the mortgage for ten years, the option deserves a closer comparison.
Example 2: half a point with smaller savings
Half a point on $400,000.
Illustrative principal-and-interest difference.
$2,000 divided by $38, rounded up.
A smaller point charge does not guarantee a faster break-even. What matters is the price paid relative to the actual monthly savings.
Example 3: temporary 2-1 buydown
Temporary buydowns need different math. Add the scheduled payment subsidies during the buydown period, then compare that funded amount with the value of other permitted concessions. There is no permanent monthly-savings break-even because the subsidy expires and the payment rises to the note-rate amount.
What can make the math wrong?
- The two quotes use different loan amounts, terms, products, or lock periods.
- APR, lender fees, or credits are missing.
- The comparison treats taxes or insurance as the cost of buying the rate down.
- You use an optimistic holding period rather than a realistic one.
- The lower rate changes other lender-controlled charges.
Ask for a zero-point baseline on the same day. Break-even is only useful when the offers are truly comparable.
Use your numbers
Move from explanation to comparison.
Lenny can analyze a Loan Estimate or compare matched rate offers using the same cost-and-timeline logic.
Official sources
Educational guidance only. Examples are hypothetical and do not include every loan cost or program rule. Final terms, pricing, eligibility, and disclosures must be confirmed by a licensed mortgage lender. Reviewed July 27, 2026.