What lender credits are (and are not)

A lender credit is the mirror image of paying points. Instead of you paying upfront for a lower rate, the lender contributes money toward your closing costs in exchange for a somewhat higher rate.

The result: less cash needed on day one, and a slightly larger payment for as long as you keep the loan.

It is not free money

The credit is financed through the higher rate. Keep the loan for many years and you will usually pay more in total interest than the credit was worth. Keep it briefly and the credit can be a clear win, because you banked the upfront savings and never paid the higher rate for long.

When credits shine

• Cash to close is tight and preserving savings matters more than the lowest payment.
• You expect to sell or refinance within a few years.
• You want to compare a "least cash upfront" structure against the standard one and let break-even math decide.

What to watch

• Credits can only offset eligible closing costs; they are not cash back.
• Compare structures on the same loan amount and term, and look at APR alongside rate.
• Ask what the same lender’s no-credit rate is, so you can see exactly what the credit is costing you per month.