How a 2-Point Buydown Can Pay for Itself

Rates dropped. Great.

But what if your credit isn’t perfect?
What if your DSCR is tight?
What if you’re pushing leverage?

That’s where a buydown strategy can completely change the deal.

And in many cases, it pays for itself faster than people think.

The Scenario

Let’s use simple numbers.

Loan Amount: $500,000
Par Rate: 6.25%
Buydown Option: 5.75%
Cost: 2 points (2%) = $10,000

Now let’s look at the payment difference on a 30-year amortization.

• 6.25% payment: ≈ $3,078/month

• 5.75% payment: ≈ $2,918/month

That’s about $160/month in savings.

The Break-Even Math

Cost of buydown: $10,000
Monthly savings: $160

$10,000 ÷ $160 ≈ 62 months
That’s just over 5 years on a pure payment basis.

But here’s what investors miss…

The Real Benefit Isn’t Just Payment Savings

Lower rate =

• Higher DSCR

• Better qualification

• More leverage flexibility

• Stronger refinance options later

• Improved cash flow immediately

In many deals, that DSCR bump is what gets the file approved in the first place.

And if you refinance or sell within a few years, you’ve already enjoyed lower payments the entire time.

Why It Works Especially Well for Cash-Out Deals

On a cash-out refinance, that $10,000 cost can often be:

• Rolled into the loan

• Covered by proceeds

• Or absorbed into overall transaction structure

So instead of writing a check, you improve payment and DSCR immediately.

Even More Powerful: Add 10-Year Interest-Only

Now layer in this option:

30-year term with 10 years Interest-Only.

Instead of amortizing from day one, you pay interest-only for 10 years — dramatically lowering the monthly payment.

That means:

• Even higher DSCR

• More room at higher leverage

• Stronger performance cushion

For value-add investors or negative/near-breakeven DSCR purchases, this can be the difference between “declined” and “approved.”

When Does a Buydown Make Sense?

• Credit slightly below top tier

• DSCR hovering near minimum

• High leverage deal

• Cash-out refinance

• Purchase where rents are slightly tight

• Planning to hold at least 2–5 years

The Bottom Line

Sometimes paying 2 points isn’t a cost.

It’s a strategy.

If lowering your rate improves DSCR, unlocks leverage, and stabilizes the deal, the math often works — especially in today’s environment.

If you want to see it on your deal, we’ll run:

• Par rate vs buydown

• Fully amortized vs 10-year I/O

Side-by-side.

Call 718-635-2377 or email [email protected] and we’ll break it down in plain English.

Business-purpose loans only. Not a commitment to lend. Rates and eligibility subject to approval.