# Why does paying points cost different amounts depending on how much I'm lowering my rate?

I believe I am quite competent with most matters related to personal finance, but one thing I cannot understand no matter how much I Google is paying points on a mortgage. I talked with a mortgage agent about refinancing my mortgage and we were discussing options. She said for a 15-year fixed loan my rate would be 2.375%. I could pay points to reduce the rate to 2.25% which would cost \$110. To go down to 2.125% would be about \$1800 and 2% about \$3700. Why is it that the first eighth of a point costs so much less than the subsequent ticks down? Why shouldn't each reduction cost the same?

• Hypothetically, using your linear model ("each reduction cost[s] the same"), do you think it "should" be possible to reduce the rate all the way down to 0? If not, why not? Jan 22, 2021 at 7:55
• \$110 to lower a 15-year rate by 0.125% seems ridiculously low. Are you sure they aren't saying you'll pay a net \$110 at closing at closing? Meaning you'll get money back if you don't buy points? BTW The calculations aren't reproducible without knowing the amount borrowed and the total closing costs. Jan 22, 2021 at 13:55
• @AakashM Yes - you could loan someone else money at a rate that would yield a monthly payment equivalent to the payment difference between a 2.375% loan and a 0% loan. That would effectively be the same as paying the bank to lower the rate to zero. Jan 22, 2021 at 14:25
• I'm with @DStanley on this. The difference between 2.25 and 2.125 is \$1700, and the difference between 2.125 and 2 is \$1900. Those are pretty close. I suspect the difference between 2.375 and 2.25 is more than \$110. Can you double check the difference in what you pay (or get back) at 2.375 vs 2.25?
– TTT
Jan 22, 2021 at 19:04