What are points on a mortgage?
What are points?
Points apply to mortgage loans and are referred to as a percentage of the loan amount. They are an upfront cost associated with a mortgage. For example 1 point on a $100,000 loan is $1,000.
Why are their points on loans?
Points are generally charged for two reasons, either as loan discount points where they are utilized as an upfront premium to reduce the loan interest rate, or they are required as a premium for a specific program. You should always consultant your loan officer for specific details.
Is it okay to pay points?
Often times paying points allows you to lower your interest rate and potentially save thousands of dollars on the life of your loan.
Are points always required?
Not necessarily, please review this with your lender as everyones situation is unique.