I recently analyzed mortgage rates to see which option would offer the best return on investment and balance between monthly payments and long-term costs.

Loan and Property Details

Purchase Price: $355,000
Down Payment: $17,750 (5%)
Loan Amount: $337,250

I used local estimates for taxes, insurance, and PMI to calculate the total monthly payments.

Rate Comparison Breakdown

The buy down costs for each rate were provided to me by my lender on Oct. 22. Starting at 7.125%, each 0.125% rate decrease lowers the monthly payment by about $28.39. Here's a breakdown across different rates, showing monthly payments, cumulative costs over 5, 10, 15, and 20 years, and Year-over-Year ROI over those same periods.

Based on the numbers, I chose the 7% interest rate. Even though the other buydowns lower the payment more, the 7% seems to be the best bang for your buck. The buydown costs increase significantly after 7%, which decreases ROI considerably. The ROI is a YOY calculation based on the initial investment of the buy-down cash.

I am curious to hear others' approaches to deciding whether or not to buy down the interest rate and by how much. These are just my personal calculations so I am also open to any suggestions on what I may have missed or not considered here!

Here are the full numbers:

Interest Rate	Total Monthly Payment	5-Year Cost	10-Year Cost	15-Year Cost	20-Year Cost	Cost to Pay Down	5-Year YOY ROI	10-YOY Year ROI	15-YOY Year ROI	20-YOY Year ROI
7.125%	$3,386.17	$203,170	$406,340	$609,510	$812,680	$0.00	—	—	—	—
7.0%	$3,357.78	$201,467	$402,933	$604,400	$805,866	$421.56	12.16%	7.08%	4.94%	3.79%
6.875%	$3,329.39	$199,763	$399,526	$599,290	$799,053	$1,686.25	4.08%	3.04%	2.25%	1.77%
6.75%	$3,301.00	$198,060	$396,120	$594,179	$792,239	$2,950.94	2.93%	2.46%	1.86%	1.48%
6.625%	$3,272.61	$196,356	$392,713	$589,069	$785,426	$3,372.50	4.08%	3.04%	2.25%	1.77%
6.5%	$3,244.22	$194,653	$389,306	$583,959	$778,612	$5,058.75	2.73%	2.37%	1.80%	1.43%
6.375%	$3,215.83	$192,950	$385,899	$578,849	$771,798	$6,745.00	2.06%	2.03%	1.58%	1.27%
6.25%	$3,187.44	$191,246	$382,492	$573,739	$764,985	$8,009.69	1.95%	1.98%	1.54%	1.24%
6.125%	$3,159.05	$189,543	$379,086	$568,628	$758,171	$8,431.25	2.47%	2.23%	1.71%	1.37%

Smaller table for mobile:

Interest Rate	Total Monthly Payment	Cost to Pay Down	10-Year YOY ROI	20-Year YOY ROI
7.125%	$3,386.17	$0.00	—	—
7.0%	$3,357.78	$421.56	7.08%	3.79%
6.875%	$3,329.39	$1,686.25	3.04%	1.77%
6.75%	$3,301.00	$2,950.94	2.46%	1.48%
6.625%	$3,272.61	$3,372.50	3.04%	1.77%
6.50%	$3,244.22	$5,058.75	2.37%	1.43%
6.375%	$3,215.83	$6,745.00	2.03%	1.27%
6.25%	$3,187.44	$8,009.69	1.98%	1.24%
6.125%	$3,159.05	$8,431.25	2.23%	1.37%