DSCR discount points: will you keep the loan long enough?

One point is 1% of the loan, not a one-point rate cut

The Consumer Financial Protection Bureau defines one discount point as 1% of the loan amount, paid at closing. The amount of rate reduction varies with the lender, loan and market. A fee called a “point” may be an origination charge without a lower rate: ask what it buys.

Here we assume two alternatives for the same $250,000 loan: a 30-year, fixed-rate, fully amortizing loan with no balloon or interest-only period. One hypothetical point costs $2,500 and reduces the assumed annual rate by 0.25 percentage points. That tradeoff is an assumption, not a rule or an available DSCR program.

All other fees, principal, term and payment timing are held equal. Taxes, insurance and HOA are excluded from these P&I figures; if unchanged, they cancel in this payment difference. They still belong in your actual PITIA and DSCR calculation. Discount points are not the whole cash-to-close amount.

What if you sell or refinance in 12, 36 or 60 months?

Count the payments you expect to make on this loan, rather than how long you expect to own the property. Refinancing ends this comparison even if you keep the rental.

Simple recovery = $2,500 ÷ $42.60 monthly saving ≈ 58.7 months → first covered after 59 full payments.

At 60 payments the surplus is only $55.73 in this narrow calculation. A small difference in other fees or an earlier exit could change the result. Amounts are calculated before rounding; displayed payments and savings are rounded to cents.

Use the screen, then compare the complete proposals

This timeline excludes remaining loan balances, the time value of money, tax effects, opportunity cost, other closing fees and any prepayment charge. The two loans amortize differently, so payment savings alone do not establish the full economic break-even or a best loan.

1. Match the quotes: same principal, term, lock period and payment structure; itemize discount points separately from origination and other fees.
2. Check the exit: ask for the payoff balance and any exit charges at your likely sale or refinance date.
3. Keep liquidity separate: paying points at closing reduces money available afterward. Do not count the same dollars as both a paid fee and a retained reserve.
4. Confirm the actual documents: the CFPB source explains mortgage terminology for consumers; it does not establish DSCR eligibility or which consumer disclosures apply to a business-purpose loan.

Source and reproducible assumptions

CFPB: How should I use lender credits and points? U.S. mortgage terminology; last reviewed October 19, 2023, consulted October 31, 2026. It supports the 1% definition and the variable rate tradeoff, not our fictional rates or DSCR program terms. This is not a regional market statistic or an international lending comparison.

Model units: U.S. dollars, annual nominal rates and monthly payments. For each case, monthly P&I = L × r ÷ (1 − (1 + r)⁻ⁿ), where L = 250,000, r = stated annual interest rate in percent ÷ 1,200, and n = 360. The modeled rate is not a fee-inclusive disclosed APR. Savings equal Case A P&I minus Case B P&I; point cost equals L × 1%. The 12/36/60-payment cases use that same difference without reinvestment or early payoff adjustments.