Negative points give homebuyers a lender credit to help pay for their closing costs. In exchange, the borrower pays a higher mortgage interest rate. In some circumstances, negative points can be a good move, especially if it helps you avoid depleting your savings.

What does a negative point mean?

Negative points are closing cost rebates offered by some lenders to qualified borrowers or mortgage brokers to reduce the upfront burden of closing. These rebates are intended to help certain homebuyers come up with enough cash for closing, which can be prohibitively expensive.

What does it mean when a loan has points?

By paying points, you pay more upfront, but you receive a lower interest rate and therefore pay less over time. … Each point equals one percent of the loan amount. For example, one point on a $100,000 loan would be one percent of the loan amount, or $1,000. Two points would be two percent of the loan amount, or $2,000.