Points are fees you pay to a mortgage lender at closing to get a lower interest rate on your mortgage. One point equals one percent of the loan amount. So, if you and your lender agree to a $100,000 mortgage, one point would equal $1,000. Generally speaking, the more points that a borrower pays up front, the lower the interest rate that is charged. Thus, it makes more sense to pay points if you plan to stay in a home for a long time and can benefit from having lower interest rates over a long time period. Points are tax deductible when you purchase a home, and you may be able to negotiate with the seller to pay for some of them.
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