Buy Down Interest Rate at Buying

Buy Down Interest Rate. In order to buy your rate down that low it would cost $31,200.00. A $200,000 loan with a 4.5% interest rate and one discount point.

Each point buys down your interest rate by an amount determined by the lender, usually approximately 0.25%. Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This reduction is often compensated by a payment made when the loan is taken out, either by the borrower or the lender.

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Interest rate buydowns is a term used when borrowers pay discount points to buy down interest rates. It’s easier to work with quarters. 1% on a 15 year loan gets a 0.25% reduction. Your lender might tell you that you could purchase one point for $1,500 and buy down your interest rate to 4.25%.