What is a basis point?
A basis point (bp, often written bps) is one hundredth of one percent: 0.01%. So 100 basis points equal 1%, and 25 basis points equal 0.25%. Basis points are used wherever small differences in a percentage matter, such as interest rates and loan officer pay.
Basis point formulas
- Basis points to percent: bps ÷ 100. 125 bps = 1.25%.
- Percent to basis points: percent × 100. 0.75% = 75 bps.
- Dollar value: amount × bps ÷ 10,000. 100 bps on $400,000 = $4,000.
- Rate change: (new rate - old rate) × 100. 6.50% to 6.25% = -25 bps.
Basis points in loan officer commission
Mortgage loan officers are commonly paid a number of basis points on each funded loan. At 100 bps, a $400,000 loan pays $4,000; at 75 bps, $3,000. Read more in our guide to loan officer commission and salary, or try the commission calculator for tiered plans.
Paying loan officers in basis points?
Sequifi calculates LO commission from your comp plan, including bps rates, minimums, maximums, tiers and branch overrides, and runs payroll in the same platform. See Sequifi for mortgage.
Book a demoFrequently asked questions
What is a basis point?
A basis point is one hundredth of one percent: 0.01%. 100 basis points equal 1%, and 50 basis points equal 0.5%.
How do you convert basis points to a percentage?
Divide the basis points by 100. For example, 125 basis points is 125 / 100 = 1.25%.
How do you calculate basis points on a dollar amount?
Multiply the amount by the basis points and divide by 10,000. For example, 100 basis points on a $400,000 loan is $400,000 x 100 / 10,000 = $4,000.
How do you calculate the basis point difference between two rates?
Subtract one rate from the other and multiply the result by 100. A move from 6.50% to 6.25% is a change of 0.25 x 100 = 25 basis points.
Why are loan officer commissions quoted in basis points?
Because pay is a share of each loan amount, and basis points make small percentage differences easy to compare. A loan officer paid 100 bps earns 1% of each funded loan.