Definition
Mortgage points are an upfront fee you can pay to a lender in exchange for a lower interest rate on your mortgage. One point is equal to 1% of the loan amount.
Understanding Mortgage Points
Mortgage points come into play when finalizing your loan details. They let you lower your interest rate by paying more upfront. Think of it as prepaying some interest to save money later. Example: Paying 1 point on a $200,000 loan might cost $2,000 and reduce your rate by 0.25%. This can lead to lower monthly payments over time. It's not an extra fee you have to pay; it's a choice that could fit your long-term plans.
