Points & Credits Guide
Discount Points vs. Par Rate vs. Lender Credits: The Break-Even Formula
Quick Answer (BLUF): One mortgage discount point equals 1% of your loan amount paid upfront to permanently lower your note rate, whereas a lender credit accepts a slightly higher note rate to offset closing costs. Divide upfront point cost by monthly savings to find break-even.
Visual Cost & Payment Breakdown · Discount Points & Break-Even Calculator
Point made
Discount points are an upfront charge that lowers your interest rate; lender credits do the reverse, lowering closing costs in exchange for a higher rate. Paying points makes sense only if you keep the loan long enough for the monthly savings to repay the upfront cost. Compare options on Loan Estimates from the same lender on the same day.
Last reviewed against the primary sources listed below.
ToolBreak-even calculatorMonths until points pay off.BasicsPoints and creditsTwo ends of one dial.PaperworkOn your estimateWhere to find them.DecideBreak-even thinkingTime is the key input.OptionLender creditsLower cash now, more later.OptionTemporary buydownsLower early payments only.TaxesPoints and taxesWhat the IRS says.New guideFinancing pointsWhether you can roll the cost of discount points into the loan, and wh.New guideWhen points are chosenThe point in the mortgage process when the points-and-rate choice is m.GlossaryKey termsPlain definitions with sources.GuidePoints or down paymentHow to compare spending cash on points with spending it on the down pa.GuideSeller-paid pointsHow seller concessions can cover points, and the limits that apply.PrintableLender questionsQuestions to bring to any lender, ready to print.
The core trade
The CFPB's guide to points and credits explains the trade in plain language.