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What does it mean to pay points on a mortgage?

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What does it mean to pay points on a mortgage?

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Points are a percentage of the loan amount paid at closing that may affect your interest rate. For instance, on a $90,000 loan amount, 1 point = 1% or $900. If you pay points, you may buy down the rate. Alternatively, in exchange for a higher rate, the lender may pay points to offset your closing costs.

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