They are two ends of the same scale. Points cost money upfront to lower the rate; a lender credit pays some of your costs in exchange for a higher rate. How long you keep the loan decides which comes out ahead.
Side by side
| Discount points | Lender credits | |
|---|---|---|
| Upfront | You pay more at closing | You pay less at closing |
| Rate | Lower | Higher |
| Monthly payment | Lower | Higher |
| Comes out ahead when | You keep the loan past the break-even point | You sell or refinance before it |
| On the Loan Estimate | Listed as points in section A | Shown as a lender credit in section J |
When discount points fit
- You expect to keep the loan for many years.
- You have cash to spare at closing.
- Rates are unlikely to fall enough to refinance soon.
When lender credits fit
- You expect to sell or refinance within a few years.
- You want to keep cash for reserves, moving or repairs.
- Rates may fall and you’d refinance.
Guides and calculators
- Mortgage points calculator
- Loan offer comparison calculator
- Closing costs and cash to close calculator
- Refinance break-even calculator
- Today’s average mortgage rates
Questions
Are discount points worth it?
When you keep the loan longer than the break-even point: the cost of the points divided by the monthly saving. The mortgage points calculator works it out.
What is a lender credit?
Money from the lender toward your closing costs in exchange for a higher rate. It lowers what you bring to closing and raises the payment.
