Should you pay to buy down your rate? The breakeven math, in plain numbers

Short answer: a client should buy down the rate when they will keep the loan long enough to earn back the upfront cost. That is the whole decision. Points are not a trick and not a trap. They are prepaid interest, and prepaid interest only pays off if you hold the loan past the breakeven month. Here is how to find that month in front of the client, fast.

What does a discount point actually buy?

A point is one percent of the loan amount, paid at closing, in exchange for a lower rate for the life of the loan.

Take a $400,000 loan. One point costs $4,000. Say it drops the rate from 6.75% to 6.5%. That lowers the principal and interest payment by about $66 a month.

So the client hands over $4,000 today to save $66 a month. The only question left is whether they keep the loan long enough for $66 a month to add back up to $4,000.

How do you find the breakeven in one line?

Divide the upfront cost by the monthly savings.

$4,000 divided by $66 is about 61 months. A little over five years. Past that month, the point is money in the client’s pocket. Before it, they would have been better off keeping the cash.

You keep the loan	Saved at $66 a month	Ahead of the $4,000?
3 years (36 months)	$2,376	No, still behind about $1,600
5 years (60 months)	$3,960	About even, breakeven near month 61
7 years (84 months)	$5,544	Yes, ahead about $1,500
10 years (120 months)	$7,920	Yes, ahead about $3,900

When does buying down the rate pay off, and when does it not?

Three cases cover almost every client.

They plan to keep the home and the loan for seven to ten years or more. Usually yes. They will clear the breakeven with room to spare.

They expect to refinance or sell in the next three or four years. Usually no. The cash works harder in the down payment or sitting in reserves than it does buying a payment they will not keep.

They are tight on cash at closing. Reserves win. A point competes with the money the client needs after they move in, and an empty savings account is a bigger risk than a slightly higher payment.

The line that moves the conversation

Stop leading with the rate. Lead with the choice.

Try this: “Here are two versions of your loan, side by side. One costs a bit more today and less every month. One costs less today. About how long do you plan to keep this house?” Then point at the version that costs them less over that time.

You did not sell points. You showed the math and let the number decide. That is the difference between quoting a rate and advising a client.

In WealthLens, the buydown and its breakeven month are built into the scenario. Move the points up or down and the breakeven updates while the client watches, so the tradeoff is something they can see instead of something they have to take on faith.