A buydown mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. is a loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.. that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.
This mortgage calculator calculates your savings from participating in an interest rate buydown program. You can compare your cost to participate — the additional “points that you must pay up front — with your total savings.
Paying these points may or may not make sense for your unique situation, depending on how long you plan to stay in the home and keep the loan.
Simply enter the loan amount and term, the base interest rate, the discounted interest rate, and the points paid to get that rate. Then click Calculate. If the length of time you plan on staying in the home is great than the “Number of Months to Break Even,” then paying points will be beneficial to you.