Here is the money problem, Patriot Nation: a full point costs more than you want to spend, but a whole point is not your only option. You can buy a quarter point, a half point, or 0.63 of a point, and pay only for the rate you actually get. The trick is knowing what each custom amount buys, because the difference between too little and too much is real cash every month. Let's see how custom points actually price out.
PATRICK'S QUICK ANSWER
You can buy a custom amount of points, not just whole points, and lenders quote fractional discounts in pricing. The deeper you buy down, the more each additional point does, though the curve flattens as rates get lower. I model the exact dollar cost and the exact monthly savings at the custom level you want. Then I compare that against your break-even, because a custom buy only makes sense if you keep the loan past it. Ask Patrick how custom buydown structures would work for your loan.
You can buy custom point amounts ranging from fractions of a point to multiple points. Rate reduction scales roughly linearly with the amount you purchase.
Most lenders allow point purchases in 0.125 or 0.25 increments. The rate reduction is typically proportional: buying 0.5 points gives roughly half the rate reduction of 1 point. Patrick Kevin Fagan helps San Antonio buyers find the optimal point amount for their specific situation.
Available Increments
The term to know is point increment: the fraction of a point you can buy, and the smallest unit on the lender's rate sheet. The meaning: most lenders offer point purchases from 0.25 points up to 2 or 3 points, with common increments of 0.25, 0.50, 0.75, 1.0, 1.5, and 2.0, and some go granular with amounts like 0.375 or 0.625. The money part: each increment is a percentage of your loan amount, so a quarter point on a $300,000 loan is $750, and you pay only for the rate you actually get. The real-world consequence: the exact increments depend on the lender's rate sheet, so if you need a specific amount, find the lender that offers it instead of settling for a round number you overpay for.
Rate Reduction Scaling
The term to know is scaling: how much rate each point buys, and it is roughly linear. The meaning: if 1 point reduces your rate by a quarter point, then 0.5 points typically reduces it by about an eighth, and 0.25 points by about a sixteenth. The money part: the relationship is not perfectly linear at extreme amounts because of lender pricing adjustments, but it is close enough for planning, and the deeper you buy down, the more each additional point does until the curve flattens as rates get lower. The real-world consequence: ask your lender for the exact rate at each point level on your actual loan, because the scaling on your file is what decides whether the custom amount is worth the cash.
Lender Options
The meaning: different lenders have different point pricing structures, and some offer very granular increments while others only quote whole or half points. The money part: shopping multiple lenders helps you find the exact point amount that matches your break-even target, and as a mortgage broker I can compare rate sheets across lenders instead of quoting one. The real-world consequence: a custom point amount only makes sense if you keep the loan past the break-even, so model the exact dollar cost and the exact monthly savings at the level you want, then let the break-even make the call.
Ask Patrick about custom buydown structures
Get a straight answer on custom buydown structures and whether paying points makes sense for your loan.
