What are Mortgage Points? Mortgage Points, also known as
discount points, are fees the borrower pays the lender to lower
their interest rate. Points are expressed as a percent of
the loan; one point is equal to one percent of the loan amount.
Lenders charge points which are essentially finance charges, as
a way to make a profit and borrowers buy points to decrease
their interest rates and mortgage payments.
Should you buy points?
general rule of thumb, you should really only consider buying
points if you are planning on owning your home for a long time
and not if it's for only a couple years. To know for sure,
divide the number of points by the number of years you expect to
hold the mortgage, then add the results to the interest rate of
the loan with the points.