Basis Point

A basis point is one hundredth of a percentage point, so 25 basis points is 0.25%. Lenders use basis points to quote rate changes, margins and pricing adjustments, including the rate add-ons on a DSCR loan for lower ratios, higher LTVs or shorter prepayment periods.

Small moves matter at DSCR loan sizes. On the site example, 25 basis points on a $375,000 loan changes the payment by about $64 a month and the ratio by about 0.02. A ratio sitting at 1.01 on a lender with a 1.0 minimum can fail from a quarter point of rate change between the quote and the lock.

Rate sheets often list adjustments in basis points or in fractions of a point. A ratio below 1.0, a cash-out refinance or a short-term rental can each add basis points to the base rate, and they stack.

Further reading: Basis Point on Wikipedia.