How to Get a Lower Rate by Putting Less Down

Around this time in 2022, the idea of buying the right home now and refinancing to a better mortgage interest rate later became all the rage. Three years later, and in an uncertain economic environment, “date the rate, marry the home” is not such a convincing mindset after all.  

Instead, we want to work on a for-sure basis; go off the assumption that the mortgage you get is the one you’re going to keep. So, how can you be certain that you’re getting a great rate? Discount points. 

If this applies to you… 

According to NAR’s 2024 Profile of Home Buyers and Sellers, the median down payment for first-time home buyers was 9%. If that’s the middle amount, there are plenty of buyers who have saved up enough to put down 10% or more. If this describes your situation, keep reading. 

Down Payment vs. Points

What if you traded in some of that down payment money for discount points?  In our illustration below, we’re going to show the significantly positive impact of opting for a lower down payment and reallocating the remaining upfront money to the purchase of points. 

The Example 

Let’s take 6.50%* as the market 30-year rate and $350,000 as the purchase price for this example. If one discount point is equal to 1% of the loan amount, and lowers the interest rate by 0.25%, here’s how the monthly and upfront costs stack up: 

• 5% down + 2 points | Monthly Payment: $1,994 | Upfront: $24,150
• 10% down + 0 points | Monthly Payment: $1,992 | Upfront $35,000

The Conclusion

• Putting less down and lowering your interest rate with points results in about the same monthly payment as putting more down. Except you’re getting a much better deal on your mortgage. 
• Putting less down and lowering your interest rate with points requires less upfront money than making a larger down payment. This leaves you with more money to make additional payments toward your principal balance. 

In addition, these two things are also true: 

• By lowering your rate instead of making a larger down payment, you start saving money on interest from your very first mortgage payment. 
• Even if you don’t make additional principal payments, points will save you more money over the life of the loan than a larger down payment would. 

For someone who has the choice of making a 5% vs. 10% down payment, these four conclusions provide much more peace of mind than going into a home purchase hoping that something will change in the future. Plus, who doesn’t love knowing that they’re getting a better deal?

If you’re currently on the hunt for a better mortgage interest rate, fill out the form below. Our response will come from a real, live mortgage banker who is ready to run the numbers for you.  

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*For informational purposes only. This is not an advertised rate. 

**Rates can and do vary. The concept of this illustration still applies even with different market rates.