Quick answer
A lender credit is money the lender applies to your closing costs in exchange for a higher interest rate than you’d otherwise get. It is the reverse of discount points and appears as a negative number on the “Lender Credits” line in section J, page 2 of the Loan Estimate and Closing Disclosure.
Key facts
7.24%
30-year fixed average (used in the example)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
What the trade costs over time
Lenders price credits differently, so treat this as an illustration. On a $300,000 30-year loan at 7.24%, principal and interest is $2,044 a month. Taking a $3,000 credit for a rate 0.25 percentage point higher, 7.49%, raises the payment to $2,096, or $51 more each month. After about 59 months (roughly 4.9 years) the extra payments exceed the credit. If you expect to sell or refinance before then, the credit comes out ahead; if you’ll keep the loan longer, it costs you.
What to check
A credit can only reduce closing costs; it isn’t cash in your pocket. Once your rate is locked, a lender generally can’t shrink a disclosed credit unless a valid changed circumstance occurs, so compare the credit on the Closing Disclosure with your Loan Estimate: a smaller credit means more cash to close. Large credits that cover all costs are how “no-closing-cost” loans work — see the no-closing-cost refinance guide.
Related terms
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- CFPB: How should I use lender credits and points?
- CFPB: Is there such a thing as a no-cost loan or refinancing?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.