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What are points?

April 26, 2017Points

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What are points?

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Points (often called a “discount” or “discount points”) may be charged in order to lower an interest rate. One point is equal to 1% of the loan amount. For example, 1 point on an $80,000 mortgage would be $800.

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Points are prepaid interest. By paying points the lender collects interest up front and the borrower may be able to obtain a lower interest rate on their mortgage. A point is 1% of the mortgage amount. As an example, 1 point on a $100,000 loan would be $1,000.00.

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• Points are defined as pre-paid mortgage interest equaling one percent of the mortgage amount. • They are typically used to buy down a loan’s interest rate, usually between .125% and .375%, or to get an extended lock time frame, i.e. 90, 120 days. • Points are tax deductible. • Points to be paid do not have to be disclosed by advertised mortgage rates,which is why you see 5.125% rate for a 30 year fixed, it is typically considering several points being paid.

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Points, also known as “discount”, is money paid at closing so that you can get a lower interest rate for the life of the loan. For example, you may be quoted a rate of 7.375 with 0 points or 7.000 with 1 point. One point is equal to 1% of the mortgage amount.

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A point is 1% of the loan amount. For example, a point on a $100,000 loan would be $1,000. Discount points are fees charged by lenders to reduce the amount of the interest rate. Avalon Mortgage does not charge discount points. We are able to offer great rates without charging points.

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