Rate buy down fee

This is a fee paid to ‘buy’ your interest rate down. It is also commonly referred to a as loan discount fee.

There is not always a consistent ratio between the discount points you pay and the amount it lowers your interest rate. The first point you pay may lower your interest rate by 0.25% but the second point may lower it by more or less than 0.25%. If you are interested in buying down your interest rate, have your mortgage broker work up several options. Make sure you calculate not only the cost and monthly savings, but the break even point as well.