Understanding Closing Costs
In today’s fluctuating economy, Canadian homeowners are increasingly looking at refinancing their mortgages
Mortgage points and rate buydowns allow borrowers to reduce their interest rate by paying an upfront fee at closing. In certain market conditions, buying down your rate can significantly reduce long-term interest costs.
Understanding how mortgage points work helps you decide whether paying more upfront saves money over time.
Mortgage points and rate buydowns allow borrowers to pay upfront fees to reduce their interest rate and lower monthly payments.
Mortgage points (also called discount points) are upfront fees paid to lower your interest rate.
1 point = 1% of the loan amount
Points reduce your interest rate
Paid at closing
Example:
On a $400,000 loan, 1 point would cost $4,000.
The exact rate reduction depends on market conditions and lender pricing.
Disclaimer: Advertised rates and fees depend on borrower qualifications and market fluctuations.
Each point purchased typically reduces your interest rate by a fraction of a percent.
For example:
Without points: 6.75%
With 1 point: 6.50%
With 2 points: 6.25%
The benefit depends on:
Loan size
Time you plan to keep the mortgage
Break-even timeline
At Simply Approved Mortgages, our mission is to make homeownership more accessible and affordable. We operate on a lender-paid compensation model, with average compensation of approximately 1.5%, which is generally lower than typical industry ranges. This structure may help reduce certain costs embedded in mortgage transactions, while allowing us to maintain a strong focus on transparency, responsible loan structuring, and service quality.
Disclaimer: Simply Approved Mortgages complies with all state and federal licensing requirements that we are licensed in.
The break-even point is the amount of time it takes for monthly savings to recover the upfront cost of buying points.
For example If:
You pay $4,000 for 1 point
You save $150 per month
Break-even occurs around 27 months.
If you plan to sell or refinance before break-even, points may not make sense.
A rate buydown reduces the interest rate either permanently or temporarily.
There are two main types:
Pay upfront at closing
Rate reduced for entire loan term
Similar to buying discount points
A 2-1 buydown reduces the rate temporarily:
Year 1: Rate reduced by 2%
Year 2: Rate reduced by 1%
Year 3 onward: Full rate applies
Temporary buydowns are often used to reduce initial payments.
Learn More: 👉 2 in 1 Buydown
Buydowns may be paid by:
The borrower
The seller (as a concession)
The builder (new construction incentive)
In competitive markets, seller-paid buydowns are common.
Buying points may make sense if:
You plan to stay in the home long-term
You want lower monthly payments
You have additional funds at closing
Interest rates are elevated
Points may not make sense if:
You plan to refinance soon
You expect rates to drop
You have limited cash at closing
Choosing between paying points or accepting a higher rate depends on:
Cash flow goals
Time horizon
Risk tolerance
Future rate expectations
There is no universal answer — it depends on strategy.
Use a mortgage calculator to estimate payment differences with and without points.
Learn More: 👉 Mortgage Calculator
Learn More: 👉 Buydown Calculator
For official information on mortgage disclosures and fee structures, review:
We operate on a lender-paid compensation model, with average compensation of approximately 1.5%, generally lower than typical industry ranges. This approach may support affordability while providing access to competitive mortgage options.
Our team of seasoned professionals is dedicated to simplifying the mortgage process, providing personalized solutions, and ensuring you feel confident every step of the way.
We prioritize honesty and clarity. From disclosing every detail upfront to ensuring no hidden surprises, we build trust through our commitment to your financial success.
At Simply Approved Mortgages, our mission is to make homeownership more accessible and affordable. We operate on a lender-paid compensation model, with average compensation of approximately 1.5%, which is generally lower than typical industry ranges. This structure may help reduce certain costs embedded in mortgage transactions, while allowing us to maintain a strong focus on transparency, responsible loan structuring, and service quality.
We provide access to competitive mortgage options across a variety of loan programs and terms. Our approach focuses on responsible loan structuring based on lender guidelines and borrower qualifications. Explore our mortgage solutions to better understand your available options and how they may support your homeownership goals.
Getting pre-approved for a mortgage is easy with our online application process. Fill out our secure application form, and our team will review your details quickly, so you can start your mortgage journey with confidence.
Once your application is received, a dedicated mortgage specialist will contact you to discuss your needs and preferences. We’ll work together to find the best mortgage options that align with your goals.
After reviewing and selecting the ideal mortgage plan, we’ll guide you through the approval process and ensure everything is in place for a smooth closing. Soon, you’ll be ready to move into your new home!
Prefer personal guidance? A licensed loan officer is available to help.
In many cases, discount points may be deductible. Consult a qualified tax professional.
The reduction varies by market and lender but typically lowers the rate by a fraction of a percent.
It can reduce early-year payments, but long-term value depends on your refinance or move timeline.
Yes. Seller concessions can cover buydown costs depending on loan type.
Take control of your home-Take the guesswork out of your home-buying journey. Use our Mortgage Calculator to estimate your monthly payments and make informed financial decisions.
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In today’s fluctuating economy, Canadian homeowners are increasingly looking at refinancing their mortgages
In today’s fluctuating economy, Canadian homeowners are increasingly looking at refinancing their mortgages
In today’s fluctuating economy, Canadian homeowners are increasingly looking at refinancing their mortgages
Reduce your monthly payment or loan term while unlocking the full potential of your home’s equity!