Points, lender credits and rate buydowns
Discount points are fees you pay at closing to lower your interest rate. One point equals 1% of the loan amount. Lender credits work the other way: a higher rate in exchange for lower closing costs.
Points
- Paying points makes sense only if you keep the loan long enough for the lower payment to repay the cost.
- Example only: on a $400,000 loan, one point costs $4,000. If it saves $60 a month, it takes about 67 months to break even.
- Points appear on page 2 of the Loan Estimate, so you can compare offers line by line.
Temporary buydowns
- A temporary buydown lowers the payment for the first year or two, paid for up front, often by the seller or builder.
- After the buydown ends, the payment goes up to the full note rate. Make sure you can afford that payment.
- Ask the lender whether you qualify at the full rate or the reduced one.
Questions people ask
- Can the seller pay my points?
- Often yes, within limits set by the loan program. Seller concessions are negotiated in the contract.
- Are points the same as origination fees?
- No. Origination charges pay the lender for making the loan. Discount points buy a lower rate. Both appear on the Loan Estimate.
- Should I pay points if I might refinance?
- If you expect to refinance or sell before the break-even point, paying points usually costs more than it saves.
Official sources
Facts checked 2026-11-01. General information, not financial, legal or tax advice. We are not a lender.