HMDA Data Show Much Larger Percentage of Borrowers Are Paying Points


A recent analysis of data from the Home Mortgage Disclosure Act (HMDA) by Zillow Home Loans finds nearly 45% of conventional primary home borrowers opted to purchase mortgage points in 2022 as a way to reduce their monthly payment.

The historically low interest rates of 2019-2021 saw far fewer buyers opting for points: 29.6% in 2021, 28.4% in 2020 and 27.3% in 2019. And borrowers who opted for a cash-out refinance loan (on a conventional loan for a primary home) bought even more points in 2022: 57.8% of these borrowers purchased points (compared with 48.4% in 2021, 44.2% in 2020 and 41.3 in 2019).

Regardless of income level, borrowers were more likely to purchase points for homes in the top and middle price tiers than for homes in the bottom price tier. This could be because the impact of lowering interest rates is greater on more expensive mortgages.

Reducing interest rates doesn’t come for free, and buyers need to determine if paying up front to reduce the fee in favor of lower monthly payments is worth it. Generally, mortgage applicants need to pay 1% of the loan amount to cut the interest rate by 0.25%. A break-even calculator can help buyers determine if paying more now to buy points could save them money in the long run.

“Buying points can be a great option to improve monthly affordability – there are many different mortgage products, including buying points and the 2/1 buydown buyers can explore,” says Erika Kerry, a loan officer at Zillow Home Loans. “These options are good examples of why it is so important to work with a knowledgeable loan officer. The loan officer should be a partner in the buying process, helping explain options so buyers can make an educated decision.”

Affordability remains a top concern for home shoppers. A recent Zillow analysis found that nationally, home values are about 25% above where they would need to be for affordability to return to historical norms.

These challenges should not be confused with a lack of desire to purchase a home. For those who can afford to buy now, they should find less competition than the buying frenzy of years past. This means buyers are more likely to get into the right house, as opposed to the only house they can find, which is important considering the majority of homeowners are in their home for about 15 years.

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