One percent of the total loan amount
Loan rate points can be either positive (discount points) or negative (rebate points). The more positive points you choose to pay up-front, the lower your interest rate will be. For every point you pay, your rate will go down by about .25%. On the other hand, you can opt for a loan with a higher interest rate in exchange for a rebate, which will give you a credit towards paying some of your non-recurring closing costs, such as title insurance, appraisal and origination fee. You can't get any cash back from rebate points.
Example: How can points affect an 8% loan for $100,000?
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Points | Interest rate | Pay/receive | Monthly payment | |
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1.0 | 7.75% | You pay $1,000 for a lower rate | $719 | |
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0.0 | 8.00% | You pay $0 | $736 | |
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-1.0 | 8.25% | You receive $1,000 towards closing costs and have a higher interest rate | $753 | |
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