![]() A lender may, at their discretion, offer incentives to decrease points or increase credits (based on the option you've selected) depending on a number of circumstances including promotional offers, etc.Įvery lender has a specific pricing structure, which is why different lenders offer the same rates at different prices.Īt Better Mortgage, transparency is key to us, which is why points and credits are displayed in actual dollar values when you view your personalized rate options in your Better Mortgage account. Points are calculated as a percentage of the total loan amount, with 1 point equal to 1%.Ĭredits are also calculated as a percentage of the total loan amount. To recap: points mean paying more at closing to get a lower interest rate, and credits mean paying less at closing in exchange for a higher interest rate. In other words, you’re getting credit during closing. You’re taking a higher interest rate in exchange for money from the lender to lower your closing costs or even pay for them completely. Your closing costs will be higher, however, you can take advantage of a lower rate, meaning lower monthly payments and less paid over the life of the loan.Ĭredits (also known as lender credits) are the opposite of points. Paying points allows you to make a trade-off between your upfront closing costs and your monthly payment. Points (also known as discount points), amount to a one-off fee paid in addition to your normal closing costs that let you get a lower interest rate. In this article, we’ll explain what they are, why one option may be preferable over another, and where to find them on your Loan Estimate so you can use them to calculate the true cost of your loan. Whether you’re looking to buy a home or refinance an existing mortgage, points and credits are two words you’ve probably come across. Where they are on your Loan Estimate and how they affect your true loan cost Why you’d choose one or the other (or neither!) What points and credits are and how they’re calculated ![]()
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