Mortgage Rates, APR, Fixed vs. ARM, Points, and Buydowns
Learn what changes a mortgage rate, how APR differs, when fixed and adjustable rates behave differently, and how points, credits, and temporary buydowns affect cost.
Checked against official sources on 2026-07-15
A market average is not your quote
Freddie Mac publishes a national weekly Primary Mortgage Market Survey, but an individual offer depends on the loan program, term, credit profile, loan-to-value, occupancy, property, points or credits, lock period, and lender pricing. Compare offers issued on the same day with the same assumptions whenever possible.
Interest rate and APR answer different questions
The interest rate prices the principal you borrow. APR incorporates the interest rate and certain fees to help compare loans, but it does not replace a line-by-line review of cash to close, monthly payment, mortgage insurance, or how long you expect to keep the loan. On an ARM, APR also depends on assumptions about future adjustments.
Fixed rate versus adjustable rate
A fixed rate gives predictable principal-and-interest payments for the loan term. An ARM usually starts with a fixed period, then adjusts using a stated index plus margin, subject to initial, periodic, and lifetime caps. Before accepting an ARM, read the worst-case payment on the Loan Estimate and ask whether your budget can carry it without relying on a future refinance.
Points, lender credits, and temporary buydowns
One discount point equals 1% of the loan amount, but the rate reduction is not fixed across lenders or days. Lender credits reduce upfront closing costs in exchange for a higher rate. A temporary buydown subsidizes early payments but normally does not change the note rate used for the long-term obligation. Compare break-even periods and the full loan cost over realistic holding periods.
Rate locks reduce one risk and create a deadline
A rate lock can protect agreed pricing for a stated period, subject to its terms. Confirm the locked rate, points or credits, expiration date, extension cost, and what happens if the loan changes or closing is delayed. A verbal rate discussion is not a substitute for written lock and disclosure documents.
Common questions
- Does paying one point always lower the rate by the same amount?
- No. One point always equals 1% of the loan amount, but the rate reduction varies by lender, loan type, and market conditions.
- Can I assume I will refinance before an ARM adjusts?
- No. Future rates, property value, income, credit, and lender standards are unknown. Evaluate the maximum potential payment before accepting the loan.
Education, not a loan decision
This guide is general education. It is not a personalized rate quote, approval, legal opinion, tax advice, or lending recommendation. Confirm current program terms and your own eligibility with licensed professionals. You may use any lender.