What That Low Mortgage Rate Isn't Telling You
WHAT YOU'LL LEARN
Why a lower rate is not always the better deal
What to look for on your Loan Estimate
How to know if buying points is worth it
WHAT YOU'LL LEARN
Why a lower rate is not always the better deal
What to look for on your Loan Estimate
How to know if buying points is worth it
You’ve probably seen a mortgage rate advertised somewhere that made you drop everything and stop scrolling. Maybe partly out of surprise, or maybe partly out of FOMO. And maybe your first thought was probably something like, "Wait, how?" That’s a totally valid reaction. But that number on the screen is rarely the whole story, and we think you deserve to know what is actually going on behind it.
A Rate Is Just One Piece of the Puzzle
Here’s something the fine print does not always make obvious: a lot of those “Wait, how?” rates come with discount points built right in.
Points are essentially prepaid interest. You hand over a chunk of cash at closing in exchange for a lower rate over the life of the loan. Sounds like a fair trade, right? Maybe. But only if you knew you were making that trade in the first place.
For example, you may pay a fee, usually 1% of your loan amount per point, and in return, you get a lower interest rate. One point typically shaves about 0.25% off your rate. On a $300,000 loan, that is $3,000 out of pocket.
Again, not always a bad thing! But it should be your decision, made with full knowledge of what you are signing up for.
The tricky part is that points can quietly show up in your closing costs without anyone making a big announcement about it. One day you are excited about a great rate, and the next you are wondering why your cash to close looks a little... chunkier than expected.
A Lower Rate Is Not Always a Better Deal
We probably don’t have to tell you this, but sometimes things are too good to be true.
Depending on how long you plan to stay in the home, paying points upfront might not save you a single dollar. In fact, it could cost you more overall.
Here’s a simple way to picture it. Take what the points cost you upfront and divide that by how much you would save each month with the lower rate. That tells you your break-even point. If you’re planning to move, upgrade, or refinance before you hit that number, those points essentially went nowhere for you.
Your lifestyle and your plans matter just as much as your rate. A good lender (👋) will help you figure out which option actually makes sense for where you are headed, not just hand you a number, kick their feet up, and call it a day.
Pay Close Attention to Your Cost Sheet
When you compare lenders, don’t stop at the rate.
Pull up your Loan Estimate and look at the full picture. How much are you paying in closing costs? Are there points involved? What is the annual percentage rate (APR), which folds in fees and gives you a more complete view of the loan's true cost?
If a lender is choosing not to walk you through those details without you having to dig for them, that’s worth noticing. That’s worth shopping around more. Transparency should absolutely never feel like pulling teeth.
The Honest Truth
A competitive rate is a wonderful thing and we love getting one for our customers. But the best mortgage is the one that fits your actual lifestyle, not just the one with the lowest number in the headline. So ask questions, read the details, and work with someone who welcomes that curiosity instead of brushing past it.
We are those people. Bring your questions, your confusion, and yes, even that ad you saw with the suspicious rate. We’re happy to break it all down with you. Let's find the number that actually makes sense for you.