The first question is not “how low is the rate?”
When a lender says you can get 6.00% instead of 6.25%, the first useful question is: how much does that lower rate cost?
A point is 1% of the loan amount. On a $500,000 refinance, one point is $5,000. Half a point is $2,500. A quarter point is $1,250.
A simple points example
Suppose the zero-point quote is 6.25%. The lender can lower the rate to 6.00% for $3,500. If that lower rate saves $85 per month, the break-even is about 41 months.
Now the real question appears: will you still have this loan 41 months from now?
Estimate point break-even
Simplified estimate. Actual payment differences depend on loan amount, term, APR, taxes, insurance and final loan terms.
When paying points often makes sense
- You expect to keep the loan well past the break-even period.
- The point cost is modest relative to the monthly savings.
- You are not likely to refinance again soon.
- You have enough cash and are not weakening your reserves.
When points often do not make sense
- You may move before the break-even point.
- You expect to refinance again if rates fall.
- The cost is large and the monthly savings are small.
- The quote looks good only because the rate was bought down.
The question to ask every time
Ask for the zero-point option. Then compare it against the lower-rate option. That one request often makes the quote much easier to understand.
Start the conversation
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Do not compare the rate by itself
A refinance quote is a package. The rate matters, but so do points, lender credits, closing costs, appraisal assumptions, lock timing, and how long the homeowner expects to keep the loan.
A quote with a lower rate can be more expensive if the cost to get that rate takes too long to recover.
Quote questions worth asking every time
- What is the rate with zero points?
- Are lender credits included?
- What are the total closing costs?
- Which costs could still change?
- How long is the break-even period?
- What happens if I sell, move, or refinance again?
The practical test
A good quote should get clearer when you ask questions. If the quote becomes harder to understand, or if the conversation shifts back to the headline rate every time you ask about cost, slow down and compare the structure more carefully.
Estimate costs before comparing offers
Use the cost estimator to organize closing costs, lender credits and points before relying on a quoted monthly payment.