Buy-Down Rate Calculator







 

What is Buy-Down Rate Calculator?

A Buy-Down Rate Calculator is a useful tool for anyone looking to purchase a home or refinance their existing mortgage. By using this calculator, you can determine the percentage rate of a loan buy-down, which is the cost of discount points required to lower your interest rate, based on the monthly savings it provides.

Formula

The formula for calculating the Buy-Down Rate (BDR) is:

BDR = CD / S * 100

Where:

  • BDR = Buy-Down Rate
  • CD = Cost of Discount Points
  • S = Monthly Savings

For example, if the cost of discount points is $2,500 and the monthly savings is $50, the Buy-Down Rate would be:

BDR = 2,500 / 50 * 100 BDR = 5%

This means that by paying $2,500 in discount points, you can lower your interest rate by 5%.

How to Calculate

To use a Buy-Down Rate Calculator, simply input the cost of discount points and monthly savings into the appropriate fields and click the “Calculate” button. The calculator will automatically compute the Buy-Down Rate and display the result.

FAQs

What are discount points?

Discount points are fees paid to the lender at closing in exchange for a lower interest rate. Each discount point typically costs 1% of the total loan amount and can lower the interest rate by 0.25%.

Is it always worth it to buy down a mortgage rate?

It depends on your financial situation and long-term goals. If you plan to stay in your home for a long time, buying down your interest rate can save you money over the life of the loan. However, if you plan to sell or refinance in the near future, it may not be worth the upfront cost of discount points.

Author

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