What are points?
Points, also known as Discount Points, are a source of confusion for many home loan borrowers. When shopping for a loan, your clients have many options with respect to paying points. A point is calculated as a percentage of the loan amount. For example, 1 point charged for a $100,000 loan would be $1000, and ½ point for the same loan would be $500. Although “points” are part of the closing costs, they are not considered loan fees. They are an optional feature of the loan, which enable the borrower to buy the interest rate up or down. Interest rates are generally presented in increments of eighths. The table below shows how different interest rates and points are typically shown. This example is also for a $100,000 loan amount. To get a loan with a rate of 6.00%, the borrower would not pay any points; however, to get a rate of 5.75%, 1.00 point ($1000) would be required.
Paying points is a way to reduce your interest rate when you purchase or refinance your home. In essence, you are paying up front for a lower interest rate to reduce your monthly payment over the life of your loan term. One point is equivalent to one percent of your loan amount, so one point on a $100,000 loan amount is equal to $1,000. As a general rule, it makes sense to pay points if you intend to keep your home for a long enough period of time where the savings in your monthly payment eventually makes up for the extra fees you pay up front. To find out if paying points makes sense for your situation, call one of our friendly loan specialists for a no-obligation, free quote.
Points are your reward for running a store and being a storekeeper. We really value your expert musical knowledge and appreciate the time and effort you’ve put into your store to generate sales. We don’t expect you to do this for nothing, so every time someone makes a purchase from your store you earn a 10% reward in the form of points which can then be used to purchase music on the site.
