Answer
How do mortgage points work?
One point costs 1% of your loan amount and buys a lower rate, usually about 0.25% to 0.375% lower. On a $600,000 loan, one point is $6,000.
A lender credit is the opposite: you take a slightly higher rate and the lender pays part of your closing costs.
Break-even: divide the cost of the points by the monthly savings. If you'll keep the loan longer than that many months, points win. Most people in Washington refinance or move within 7 years, so the "lowest payment" option is not always the cheapest one.
$600,000 loan on a $750,000 King County home, 760 credit, 30-year fixed:
- No points: 6.750% (6.790% APR), $3,892 a month, with a $3,000 lender credit.
- Paying points: 6.500% (6.608% APR), $3,792 a month, for $3,000 in points (0.500%).
- Break-even: $3,000 ÷ $100 a month saved ≈ 30 months (2.5 years). Keep the loan longer and the points pay off.
Principal and interest only. Rates change daily and depend on your credit, loan and property; not a commitment to lend.
The card on this page prices both for your scenario. "Lowest cost" is the zero-point rate; "Lowest payment" shows roughly one point. The difference in payment and the points in dollars are right there.
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