7 Point Teaser Calculator

1. 7 Point Teaser Calculator
2. 6 Point Teaser Calculator
3. How Does A 7 Point Teaser Work

A teaser is a popular type of football bet, and one that you
should definitely consider including in your overall
football betting strategy. Teasers are similar to
parlays, in that they involve making multiple selections, but
they are not quite as straightforward. They can be based on
either point spread bets or totals bets, and the initial spreads
or total lines are moved in your favor.

We provide a brief overview of exactly how teasers
work in this article, and plenty of strategy advice
too. We also address two major misconceptions regarding these
bets.We also have a video put together that you can watch if you don’t want to read through. Our resident sports betting expert Drew Goldfarb breaks down NFL teasers very well here:

When betting NFL teasers, the most common football teaser varieties are selecting two or three teams and teasing NFL lines by 6, 6.5 or 7 points. As an example of a football betting teaser, let’s say you like Pittsburgh -4.0 and Los Angeles +6.0, but are worried that the Steelers might only win by a field goal or the Chargers might lose by a. Let’s take a look at the top sportsbooks for 6 point, 6.5 point, and 7 point football teasers and where to get the biggest edge. For those of you who really love teasers, you can move the line 20 points at Wagerweb! 6 Point Teaser Odds. Sportsbook 2 teams 3 teams 4 teams 5 teams 6 teams 7 Teams 8 teams 9 teams 10 teams; Sportbet +100 +180.

Please note, what you’re about to read covers teaser
betting strategy in great depth. Although the material
is long, we encourage you read it all if you want the best
chance of making money from this particular bet. No matter if
you’re a seasoned gambling professional, or someone just
starting out, learning the information is near certain to lead
to additional profits betting on NFL football both this season
and all future seasons to come.

This page focuses entirely on betting
NFL teasers. We have written another article that deals with
betting college football teasers.

Misconceptions Surrounding NFL Teasers

There are two commonly held beliefs regarding NFL teasers,
and these are as follows.

1. They are only for experienced and knowledgeable bettors.
2. They are always sucker bets.

Although teasers are rightly referred to as an advanced
wager, they are not so complicated that you should avoid them
unless you’re an expert. So the first statement above is simply
not true.

It’s also wrong to think that they can’t be profitable. If
you can learn how to use them correctly, and in the right
circumstances, then it’s perfectly possible to make money from
them. We’re not saying it’s easy, as it’s not, but then no
aspect of successful football betting is easy. The point is that
it’s plain wrong to just broadly label NFL teasers as sucker
bets.

What is a Teaser?

In case you’re not aware, a teaser bet is a parlay that uses
a modified point spread. You’re given a better point spread than
the board is offering, and these pay less than a parlay.

To explain, let’s say in a given week there are two games
you’re interested in betting on. The first is the Chicago Bears
against the St. Louis Rams, and the point spread looks like
this.

You like the look of the Rams at -8.5, and the odds are -110.

The second game is the Minnesota Vikings against the Oakland
Raiders, with the point spread as follows.

In this one you like the look of the Vikings. The odds are
again -110.

There are three ways you can bet on the two teams you like.

1. A straight bet on each team. For each wager, you would
   have to risk $110 to win $100.
2. Betting them together in parlay, at odds of +265. This
   would give you the potential to win $265 for every $100
   wagered, if both selections win.
3. Betting them together in a teaser.

For the teasers, let’s say you do the industry standard
2-team 6-point teaser at -110 odds. This would cover both teams
in a single wager, with the spreads moving six points in your
favor. So you’d have the Rams at -2.5 and the Vikings at +9.5.
The odds would be -110 for the single wager covering both teams,
so you’d be risking $110 to win $100.

Basically, the teaser is the same as the parlay in that you
need both selections to win in order to win the wager. Because
the spread has been moved in your favor, though, the odds have
been reduced.

As we mentioned earlier, teasers can also be placed based on
total lines. However, for the purposes of this article we’re
concentrating on teasers based on point spreads.

This is only a very basic explanation of
how teasers work, as this article is primarily about the
strategy involved specific to football betting. We’ve also
provided a more detailed explanation of teasers in our general
sports betting guide.

How Teasers Can Vary

For football betting, teasers are available in all different
shapes and sizes. You can choose the number of teams you want to
include, and the number of points you want to move the spread
by. The odds then vary accordingly.

For a 2-team teaser, you’ll typically find the following odds
available.

• 6 points: -110
• 6.5 points: -120
• 7 points: -130

Some bookmakers and betting sites also offer 7.5-point
teasers at -140.

While the odds for 2-team teasers are somewhat standard, they
can vary more significantly when you include three teams or
more. It’s worth noting that many betting sites offer special
teasers where, rather than getting a larger payout, you keep
getting more points for each team added. For example, one site
offers the following.

• 3-team/10-point teasers: -110
• 4-team/13-point teasers: -120

Many other sites offer the same at much worse odds such as
-130 to -160.

If you plan on placing a lot of teasers, then you
should use a betting site or bookmaker that offers plenty of
options and attractive odds for this type of wager. A good place
to start is with our recommended football betting sites.

Betting Strategy for NFL Teasers

Back in September 2006, a poker player known as Daliman
introduced the sports betting public to basic strategy for
betting NFL football teasers. The concept he brought to forums
was not new. In fact, he disclosed in his first post that he had
read about this strategy in a book published in 2001, Sharp
Sports Betting by Stanford Wong. In tribute to the author, he
called these “Wong Teasers.”

Amazingly, he introduced them to poker forums at the start of
a season where they won at an ungodly clip; and many talented
gamblers literally bankrupted sports bookies that year. It was
the height of the poker boom (UIGEA didn’t go into effect until
the season was about over) and with these running so well that
year, many people into poker started betting on sports. The name
“Wong Teasers” stuck.

We should point out that, while these are still one of the
best blind bets in NFL football, 2006 was just an amazing year.
They are not always so successful, but if you follow the
strategy advice we provide here then you can certainly make some
money from them.

Considering that the best-known writer behind the Stanford
Wong penname didn’t write the teaser chapter of Sharp Sports
Betting, and the man that did was just sharing a strategy that
had been around since at least the 1980’s, we will refer to Wong
Teasers by their original name – “Basic Strategy Teasers.”

Introduction to Basic Strategy Teasers

Now that we have covered what a teaser is, and provided some
background information on the basic strategy, let’s look at how
to use them.

The most common margins of victory in NFL football are three
points and seven points, and basic strategy is essentially based
on the following premise.

To be clear, fully crossing means going from
a loss to win. Therefore, teasing -7 to -1 isn’t part of basic
strategy nor is teasing +3 to +9. This is because in these
examples, you’re going from a push to a win on one of the
required numbers, not a loss to a win, which is the key.

Why Margins of 3 & 7?

To explain why the margins of three and seven are so
important, let’s look at some past data. Although this is a
little outdated now, covering the seasons from 2007/08 to
20011/12, the principle still applies. We’ll be providing some
fresh data for more recent years soon, and it will probably be
very similar.

• Regular season games were decided by exactly 3 points
  14.8% of the time.
• They were decided by exactly 7 points 9.8% of the time.
• They were decided by the range 3-7 points 38.8% of the
  time.

There are no other margins of victories that come remotely
close to these percentages.

Getting the Best Teaser Odds is Key

There are two parts to the basic strategy to be concerned
with. Fully crossing the margins of three and seven is one.
Doing so at the best odds possible is the other. When using
basic strategy, a lot of novice punters forget that the best
odds possible is as much a requirement as crossing the three and
seven.

Basic Strategy Subsets

Considering we’re required to get the best odds possible and
most online betting sites start their teaser offers as 6-point
teasers, we can now decipher the two subsets to basic strategy.

• Subset 1: Tease all underdogs (from +1.5 to +2.5) by six points (to +7.5 to +8.5)
• Subset 2: Tease all favorites (from -7.5 to -.8.5) by six points (to -1.5 to -2.5)

No other subset would meet the criteria for the reason that
we’re looking for the absolute best odds possible and must fully
cross the 3-7.

The final challenge to getting the best odds relates to weeks
when there are more than 2-teams with point spreads meeting
basic strategy subsets. Here we need to know how many teams give
the best odds possible. To discuss this topic further, we need
to get into teaser math.

Teaser Math: How Many Teams per Teaser?

As mentioned earlier, teasers are parlays that use modified
point-spreads. The problem with this statement is that we’re not
actually sure what odds we’re getting for each individual team.
For example, we know on a 2-team 6-point teaser at -110 we’re
getting -110 that our teams will go 2-0 against the modified
point spread. We want to analyze whether a straight bet,
standard parlay, or teaser is best though. To do this, or any
other analysis, we’re going to need to figure out a way to break
this down to odds per team.

What we do know, considering we can select any team as our
teaser selection, is that the odds must be the same for each
team. So we’re now asking what moneyline, parlayed with the same
moneyline, results in the overall odds -110. One method a novice
bettor might use to solve this problem is to try to find the
solution via trial and error. The good news is that there’s a
much easier way.

To start, we need to consider how often we need to win in
order to average breakeven. Considering the odds are -110, what
we need to know is the implied probability of -110. We can get
this figure using our odds converter. Plugging in -110 in the
American odds field, we see the implied probability is 52.38%.
This tells us if both teams win 52.38% of the time, we’ll
average breakeven over the long haul.

To figure out how often each team individually must win, the
magic trick is to change 52.38% to a decimal (0.5238) and
calculate its square root. If you’re confused how to do this, no
problem. Just Google search a square root calculator, plug it
in, and see that the answer is 0.7237, which is 72.37%.

At this point, you can go back to our odds convertor and plug
in 72.37% under implied probability. You’ll see a 2-team 6-point
teaser at -110 is a parlay where each team is priced -262.

Allow us to go ahead and run through this one more time, now
calculating the odds on a 3-team 6-point teaser at +180.

• First we need to calculate the implied probability of
  +180
• This is 35.71%, which we convert to a decimal of 0.3571.
• We’re dealing with three teams, so we must calculate the
  cubed root of this decimal.
• This is 0.7095, or 70.95%.
• We plug this 70.95% into our odds convertor.
• This tells us that a 3-team 6-point teaser at +180 is a
  parlay where each team is priced -244.

Notice something? Remember basic strategy dictates that fully
crossing the three and seven and getting the best odds possible
are requirements. The latter tells us that when there are three
teams that meet our subsets of underdogs +1.5 to +2.5 and
favorites -7.5 to -8.5, we’ll want to do 3-team 6-point teasers
at +180 instead of 2-team 6-point teaser at -110.

Using Historical Data

In order to best illustrate why basic strategy teasers are
often times +EV, it’s helpful to look at historical data. In the
previous section, we calculated that 2-team 6-point teasers are
parlays where each team is priced -262, and that 3-team 6-point
teasers are parlays where each team is priced -244. The implied
probability of -244 is 70.95% and of -262 is 72.37%. Now keep in
mind that implied probability is a fancy word for how often a
team must win to break even.

Moving along, we already know that for point-spreads where
both sides are priced the same (example +1.5 -110 / -1.5 -110,
not +1.5 -105 / -1.5 -115), these bets are designed to be 50/50
even money propositions. If a selection in a teaser needs to win
70.95% of the time to break even, which is the rate for 3-team
6-point teasers, then moving the spread 6-points must increase
the chances to win by 20.95%. This is because we went from a 50%
proposition to a 70.95% proposition, and the 20.95% is the
difference.

Although this isn’t the best method, to keep things simple,
let’s take a look at how all basic strategy teasers have fared
over the five seasons from 2007 until 2012.

During this time, all favorites -7.5 to -8.5 went 22-20
(52.38%) against the point spread; when teased six points, they
went 33-9 (78.57%). Also, during this time, all underdogs +1.5
to +2.5 went 49-60 (44.95%); and when teased six points, they
went 74-35 (67.89%).

You’ll notice the win rates for the favorites increased
26.19%, and for the underdogs they increased 22.94%. In a 2-team
6-point teaser at -110, we needed the increase to be 22.37%; and
in a 3-team teaser 6-point teaser +180, we needed the increase
to be 20.95%. We’ve reached that increase in both cases, which
hints at the fact that if point spreads actually were covering
at the 50/50 rate intended, these basic strategy teasers are
+EV.

The Danger of Data Mining

Basic strategy teasers have been a hot topic in betting
forums for years now. In the past, road favorites weren’t doing
well, and many bettors tried claiming they were no longer a
basic strategy subset. However, in the period following those
claims, road favorites went 11-4 (73.33%).

There was then a period when people suggested avoiding home
underdogs, due to poor results in that subset.

In fact, if you look at the discussion on teasers over the
years, there has always been one subset or another trailing
behind. This circulates every few years and is simply caused by
variance. For the same reason that all four subsets cross the
two most common margins of victory, they all should have an
equal win probability.

This means basic strategy teasers are either +EV or they are
not. There’s no “all basic strategy teasers except (insert
subset) are +EV”. This results-oriented thinking is similar to
the failed logic that says patterns appearing on roulette wheels
or a baccarat score cards are helpful in knowing the results of
the next spin or hand.

For more on the topic of basic strategy, refer to the book
Sharp Sports Betting by Stanford Wong, and then search the
sports betting sub forum of twoplustwo.com if need be. The
overall consensus of the sharpest bettors in the world is: if
you can find three NFL teams just before game time that are +1.5
to +2.5 or -7.5 to -8.5 and tease them in a 3-team 6-point
teaser at +180, then you’ll be making a +EV bet.

Teaser Bets Can Be Sucker Bets

Earlier, we touched on the fact that teasers can be used on
the over/under betting total of any game as well the point
spread. We don’t believe this is something you should do though.
To show why totals are a bad idea, let’s look at the historical
results from the same five year period as before.

Over Bets

• Over bets went 651-606-23 (51.79%)
• When teased by six, they went 881-382-17 (69.75%)
• The increase is just 17.96%.

Under Bets

• Under bets went 606-651-23 (48.21%)
• When teased by six, they went 828-434-18 (65.51%)
• The increase is even lower at 17.30%.

Remember, we need to increase by between 20.95% and 22.37% to
find a +EV teaser bet. Simply put, teasing totals is a bet for
suckers, unless somehow the outcome is correlated (meaning a
2-team teaser using the point spread and total of the same game
where a correlation exists. It would be a rare occasion if this
were ever +EV; and at times, the betting sites will circle the
game to indicate that it’s not allowed.).

Earlier we shared the results from a five season period
teasing underdogs +1.5 to +2.5 and favorites -7.5 to -8.5, and
showed these all increased by more than the 20.95% and 22.37%
needed to be +EV. Had we just picked at random, here is what the
results would have been.

All Home Underdogs(Regardless of Spread)

• No Teaser: 207-213-11 (49.29%)
• Teased +6: 291-133-7 (68.63%)
• Increase = 19.37%

All Road Underdogs(Regardless of Spread)

• No Teaser: 433-388-23 (52.74%)
• Teased +6: 576-260-9 (68.90%)
• Increase = 16.16%

All Home Favorites(Regardless of Spread)

• No Teaser: 388-433-24 (47.26%)
• Teased +6: 552-271-22 (67.07%)
• Increase = 19.81%

All Road Favorites(Regardless of Spread)

• No Teaser: 213-207-11 (50.71%)
• Teased +6: 281-137-13 (68.04%)
• Increase = 17.33%

As you can see, all figures fall short of our minimum at the
20.95% increase required to break even, and extremely short of
the 22.37% needed when doing 2-team teasers at -110. Also keep
in mind that these numbers are inflated as they include both
basic strategy and non-basic strategy subsets.

No matter how you slice it, non-basic strategy teasers bet at
random are very poor sucker’s bets.

Be Careful of the Line Shades

This is an important final lesson. Remember, it wasn’t long
ago that many bookies went bankrupt over basic strategy teasers
winning at an epic clip. The online betting sites fared better
than the independent locals for the reason that they were far
more aware of the risks. Many betting sites combated basic
strategy teasers by simply changing the payouts. For example,
3-team 6-point teasers were +180 for years, and nowadays only a
small handful of sites offer better than +160.

Another tactic many betting sites use today is line shades
for both the purpose of blocking +EV teasers and to trick novice
bettors into making -EV teaser bets.

When teasing the point spread is all that matters and not the
price, betting sites often post lines such as +7.5 +105 / -7.5
-125. If you understand buying half points, you’ll know that
-7.0 -110 and -7.5 -125 have about the same expected value. The
betting site is simply moving the point spread and charging the
fair price for the move. What they’re doing here is tricking
novice bettors into thinking this is a -7.5 point spread worth
teasing, when really the correct odds are +7 -110 / -7 -110.

Make sure you’re dealing with consensus prices.
When betting basic strategy teasers, be sure to glance at the
odds offered by several betting sites to make sure the team is
at least a consensus -7.5 favorite, or at the least a +2.5
underdog, before making your bet. For the favorites, if you see
any other site offering -7 or better, this is a no bet. For the
underdog, if you find any other site offering +3 or better, this
is a no bet UNLESS +3 is priced -130 or greater.

This means that the bookmaker with the best teaser odds is
not always the best one to use. They might be shading the lines
to make the odds worse for basic strategy players, in the hope
of trapping bettors into making –EV bets.

This calculator makes it easy for home buyers to decide if it makes sense to buy discount points to lower the interest rate on their mortgage. It calculates how many months it will take for the discount points to pay for themselves along with the monthly loan payments and net interest savings.

For your convenience we list current local mortgage rates to help homebuyers estimate their monthly payments & find local lenders.

Current Local Mortgage Rates

Compare your potential loan rates for loans with various points options.

The following table shows current local 30-year mortgage rates. You can use the menus to select other loan durations, alter the loan amount, change your down payment, or change your location. More features are available in the advanced drop down

The Homebuyer's Guide to Mortgage Points

What Are Points?

Discount points are a way of pre-paying interest on a mortgage. You pre-pay a lump sum of money and then obtain a lower interest rate for the duration of the loan.

How Much Do They Cost?

Points cost 1% of the balance of the loan. If a borrower buys 2 points on a $200,000 home loan then the cost of points will be 2% of $200,000, or $4,000.

Each lender is unique in terms of how much of a discount the points buy, but typically the following are fairly common across the industry.

Fixed-Rate Mortgage Discount Points

Each point lowers the APR on the loan by 1/8 (0.125%) to 1/4 of a percent (0.25%) for the duration of the loan. In most cases 1/4 of a percent is the default for fixed-rate loans.

Adjustable-Rate Mortgage Discount Points

Each point lowers the APR on the loan by 3/8 of a percent (0.375%), though this discount only applies during the introductory loan period with the teaser-rate.

Cost of Discount Points

As mentioned above, each discount point costs 1% of the amount borrowed. Discount points can be paid for upfront, or in some cases, rolled into the loan.

Fractional Discount Points

Some lenders may offer loans with fractional discount points. In mortgage rate listing tables it is not uncommon to see a loan with 1.1 discount points.

How do Discount Points Work?

Comparing Monthly Mortgage Principal & Interest Payments With Discount Points

A home-buyer can pay an upfront fee on their loan to obtain a lower rate. The following chart compares the point costs and monthly payments for a loan without points with loans using points on a $200,000 mortgage.

Some lenders advertise low rates without emphasizing the low rate comes with the associated fee of paying for multiple points.

A good rule of thumb when shopping for a mortgage is to compare like with like. Shop based on

• annual percentage rate of the loan, or
• a set number of points

Then compare what other lenders offer at that level.

For example you can compare the best rate offered by each lender at 1 point.

Find the most competitive offer at that rate or point level & then see what other lenders offer at the same rate or point level.

Breaking Even: Should You Buy Points?

Buying points is betting that you are going to stay in your home without altering the loan for many years.

Points are an upfront fee which enables the buyer to obtain a lower rate for the duration of the loan. This means the fee is paid upfront & then savings associated with the points accrue over time. The buyer spends thousands of Dollars upfront & then saves some amount like $25, $50 or $100 per month. After some number of years owning the home, the buyer ends up benefiting from the points purchase.

Forfeiting The Benefits of Points

If the homeowner does any of the following early in the loan they'll forfeit most of the benefit of points:

• sells the home
• refinances their mortgage
• gets foreclosed on
• dies

Basic Calculation

The simple calculation for breaking even on points is to take the cost of the points divided by the difference between monthly payments. So if points cost you $2,000 and saved $40 per month then it would take 50 months to break even (2000/40 = 50).

This simplified method unfortnately leaves out the impact of the varying amounts owed on different home loans.

Advanced Calculation

The balances on various loan options are repaid at different rates depending on the rate of interest charged and the amount of the loan. A more advanced calculation to figure out the break even point on points purchases also accounts for the difference in loan balances between the various options.

Our above calculator uses this option to figure the break even point, since if you wanted to refinance your loan or sell the home at some point the remaining balance on the loan would impact your finances at that point.

Calculating Points on ARM Loans

While a point typically lowers the rate on FRMs by 0.25% it typically lowers the rate on ARMs by 0.375%, however the rate discount on ARMs is only applied to the introductory period of the loan.

ARM loans eventually shift from charging the initial teaser rate to a referenced indexed rate at some margin above it. When that shift happens, points are no longer applied for the duration of the loan.

When using the above calculator for ARM loans, keep in mind that if the break even point on your points purchase exceeds the initial duration of the fixed-period of the loan then you will lose money buying points.

Who Should Buy Points?

People who are likely to keep their current mortgage for a long time. They would have the following attributes:

• Likes the local area and plans to live in the area for at least a half-decade or more.
• Stable family needs, or a home which can accommodate additional family members if the family grows.
• Homebuyer has good credit & believes interest rates on mortgages are not likely to head lower.
• Stable employment where the employer is unlikely to fire them or request the employee relocate.

Who Should Not Buy Points?

If any of the above are not true, then points are likely a bad purchase. If you lose your job, think interest rates are headed lower, have bad credit, or plan on having kids and are buying a house where there is not enough room for the family then you are unlikely to benefit from buying points.

Financing Points

Points can be financed, or rolled into the loan. The big issue with financing points is you increase the loan's balance immediately. This in turn significantly increases the number of months it takes to break even.

In the examples shown in the table above financing the points would take the break even point from 49 months to 121 months for the loan with 1 point & 120 months for the loan with 2 points.

Living in the same home for over 4 years is common, so buying points which break even in 4 years is not a bad idea. Historically most homeowners have refinanced or moved homes every 5 to 7 years. Betting that you'll remain in place & not refinance your home for over a decade is typically a bad bet. For this reason it is not advisable to finance points.

Are Points Tax Deductible?

Home mortgage points are tax-deductible in full in the year you pay them, or throughout the duration of your loan.

The IRS guidelines list the following requirements:

7 Point Teaser Calculator

• Your main home secures your loan (your main home is the one you live in most of the time).
• Paying points is an established business practice in the area where the loan was made.
• The points paid weren't more than the amount generally charged in that area.
• You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
• The points paid weren't for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
• The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You can't have borrowed the funds from your lender or mortgage broker in order to pay the points.
• You use your loan to buy or build your main home.
• The points were computed as a percentage of the principal amount of the mortgage, and
• The amount shows clearly as points on your settlement statement.

Mortgage Points vs Origination Fees

As mentioned above, mortgage points are tax deductible. Loan origination fees are not.

Loan origination fees can be expressed in Dollar terms or as points. A $200,000 loan might cost $3,000 (or 1.5%) to originate & process. This can be expressed either in Dollars or as 1.5 origination points.

6 Point Teaser Calculator

Origination fees are negotiable but they help a lender cover their basic overhead & mitigate the risk a consumer may pre-pay their mortgage before the overhead is covered. On conforming mortgages this fee typically runs somewhere between $750 to $,1200.

These fees are typically incremented by half-percent. The most common fee is 1%, though the maximum loan origination fee is 3% on Qualified Mortgages of $100,000 or more.

• Smaller homes may see a higher origination fee on a percentage basis since the mortgage broker will need to do a similar amount of work for a smaller loan amount. On loans of $60,000 or below the cap can be as high as 5%.
• VA loans have a 1% cap on origination fees.
• FHA reverse mortgages can charge a maximum of the greater of $2,500, or 2% of the maximum mortgage claim amount of $200,000 & 1% of any amount above that.

Negative Points

Negative points, which are also referred to as rebate points or lender credits, are the opposite of mortgage points. Rather than paying an upfront fee to lower the interest rate of the loan, you are paid an upfront fee to be charged a higher interest rate for the duration of the loan.

An easy way to think of negative points is embedding closing costs in the interest rate charged on the loan.

Negative points typically come with some limitations.

• They can be used to pay for closing costs on the loan inclusive of origination fees, title fees, appraisal fees & recording fees.
• They rarely exceed the closing costs on the loan.
• They can not be used as part of the down payment on the loan.

Any loans which are advertised as having 'no closing costs' typically have negative points embedded in them where the cost of originating the loan is paid through a higher rate of interest on the loan. This fee should be disclosed on your Loan Estimate (LE) and Closing Disclosure (CD).

Another term for covering the origination costs with a higher rate is 'yield spread premium.' These fees are the commission earned by a mortgage broker or loan officer in exchange for finding a loan.

Considerations for Negative Points

When you obtain negative points the bank is betting you are likely to pay the higher rate of interest for an extended period of time. If you pay the higher rate of interest for the duration of the loan then the bank gets the winning end of the deal. Many people still take the deal though because we tend to discount the future & over-value a lump sum in the present. It is the same reason credit cards are so profitable for banks.

Buyers who are charged negative points should ensure that any extra above & beyond the closing cost is applied against the loan's principal.

If you are likely to pay off the home soon before the bank reaches their break even then you could get the winning end of the deal. There are many reasons a buyer might repay the loan soon including stock options which are coming due soon, an inheritance in the near future, or a professional flipper who only needs financing in the short term while they rehab the home.

Also in Reverse!

In the above calculator the break even point calculates how long it takes for points to pay for themselves if a home buyer opts to buy mortgage discount points. A homeowner needs to live in the home without refinancing for an extended period of time for the points to pay for themselves.

If the home buyer is instead selling points, the opposite is true. Paying off the home sooner means making more money from the negative points. When a lender sells you negative points they are betting you will not pay off your home loan soon.

Rolling the savings from the negative points into paying on the loan's balance extends the period of time in which the points are profitable for the homebuyer.

The longer the homeowner pays a higher rate of interest the more they'll compensate the bank with that higher rate of interest. Eventually they will end up paying more interest than they otherwise would have.

For people employing negative points the break even date is the amount of time before the bank would get the better end of the deal if they were selling lender credits. Buyers who pay off the loan before the break even date while employing negative points will make money on the points.

• If you buy points you want to live in the house for a long time without refinancing so the points pay for themselves.
• If you sell points you want to have the loan paid off before you reach the break even point so you are not paying the bank more interest than you would have if you chose not to buy points.

Homeowners May Want to Refinance While Rates Are Low

US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.

Are you paying too much for your mortgage?

Find Out What You Qualify For

How Does A 7 Point Teaser Work

Check your refinance options with a trusted lender.

Answer a few questions below and connect with a lender who can help you refinance and save today!