Points and lender credits are pricing tools. They can move money between upfront cost and monthly payment, but neither choice is automatically right.
Key Takeaways
- Paying points can lower the rate, but increases upfront cost.
- Taking a lender credit can reduce closing cost, but may raise the rate.
- Break-even timing helps decide whether the trade-off makes sense.
What points do
A point is upfront cost paid in exchange for a different rate structure. If the lower payment saves enough over the time you expect to keep the loan, the point may be worth comparing.
What lender credits do
A lender credit can help offset closing costs. The trade-off is usually a higher rate than a no-credit option. This can make sense when cash preservation matters or the loan may not be kept long enough to justify paying points.
The useful question
Ask how long it takes to recover the upfront cost or monthly difference. The better answer depends on your timeline, cash position, and tolerance for payment.
Rates, terms, and eligibility depend on credit profile, income, property, loan program, occupancy, market conditions, and underwriting approval.