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Mortgage Points
What Are Mortgage Points?
Mortgage points are upfront fees paid to a lender to reduce the interest rate on a loan.
One point typically equals 1% of the loan amount.
Points are also known as discount points.
Why It Matters in a Mortgage
Points can:
- Lower monthly payments
- Reduce total interest paid
- Increase upfront closing costs
Borrowers must calculate the break-even period to determine value.
How It Works
Loan: $300,000
1 Point: $3,000
Rate reduction applied
Savings accumulate over time.
Points vs. Origination Fee
Points → Buy down rate
Origination Fee → Lender processing charge
Paying more upfront can lower long-term cost.
FAQs About Mortgage Points
Are points refundable?
No.
Are points tax deductible?
Sometimes.
Do points guarantee savings?
Only if loan is kept long enough.
Related Terms
