Whats the point of paying points?
What are points? A point is 1 percent of a financial product. In the case of a mortgage, a point is 1 percent of the loan amount. Points are a part of the fee paid to the broker and lender at the closing of the loan. Not to be confused with the loan rate itself, points are reflected in the difference between the loan rate and the APR, or true cost of the loan. The points determine the competitiveness of the loan rate between brokers and lenders and can be used to leverage the cash on hand of the borrower for short-term or long-term advantage. What factors determine points? The lenders’ fees and discount points. Lenders’ fees are the costs which the lender determines to close the loan. These fees include such items as a credit report, appraisal fee, title insurance, and more. These fees may vary as much as $500 or more from broker to broker and lender to lender, so it’s well worth your time to do some comparative shopping. They’re outlined on the good faith estimate which any lender or
