Discount points, lender credits and buydowns, weighed on your own numbers
Two ends of one dial
Point made
Think of a lender's price list as a dial. Turn it one way and you pay points at closing for a lower rate. Leave it in the middle and you pay neither. Turn it the other way and the lender gives you a credit toward closing costs in exchange for a higher rate. Each choice changes both your cash at closing and your monthly payment.
Last reviewed against the primary sources listed below.
Side by side
| Discount points | Lender credit | |
|---|---|---|
| Cash at closing | More | Less |
| Interest rate | Lower | Higher |
| Best if you | Keep the loan a long time | Expect to sell or refinance sooner |
Points and credits, answered
What is one discount point?
One point is a charge equal to one percent of the loan amount, paid at closing.
Are points worth it?
Only if you keep the loan past your break-even point. Shorter expected ownership favors fewer points or a credit.