Reviewed by Jeff Shin, NMLS #1041652. Updated .
Also called: lender credits, negative points.
How the trade works
The CFPB describes it simply: you pay a higher interest rate, and the lender gives you money to offset your closing costs. The credit can only go toward closing costs. It is not cash back. How much credit a given rate buys depends on the lender’s pricing that day.
When a credit makes sense
Compare the credit with the extra interest. Divide the credit by how much more the higher rate costs each month. The answer is how many months you stay ahead. If you expect to move or refinance before then, the credit wins. If you plan to keep the loan for decades, the lower rate usually wins. See lender credit vs. a lower rate.
No-closing-cost loans
A no-closing-cost refinance is usually a lender credit large enough to cover the costs. The costs do not disappear. They move into the rate. Your Loan Estimate shows lender credits on page 2, under total closing costs.
Example
If the higher rate costs $30 more a month and the credit is $2,400, $2,400 ÷ $30 = 80 months, a little under seven years, before the extra interest catches up with the credit.
Illustrative example only, not a quote. Actual APR and terms vary.
Related terms
Related on BankPricer
Sources
Definitions on this page are summarized from the agencies that set the rules. Lenders can add stricter requirements. Checked October 7, 2026.
Not sure which of these applies to you?
That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.