PTS

Points vs. Rate

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How to use the Points vs. Rate

1
Enter the loan and timeline
Your loan amount and how long you'll keep the loan.
2
Enter the standard offer
The rate and points with fewer points.
3
Enter the buy-down offer
The lower rate and the higher points it requires.

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Worked example

A lender offers 12% with 1 point or 11% with 2.5 points on a $250,000 loan.

The extra 1.5 points cost $3,750 up front. The lower rate saves about $208 a month. It takes 18 months to earn back the extra points. On a six-month flip, buying down the rate costs about $2,500 more.

The formula

Extra points cost = Loan × (Points B − Points A)
Monthly savings   = Loan × (Rate A − Rate B) ÷ 12
Break-even months = Extra points cost ÷ Monthly savings

Common mistakes

Buying down on short projects. Points pay back slowly. Most flips are repaid before the buy-down breaks even.
Forgetting the downside case. If your project might run long, check the result at your worst-case timeline too.

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