- A mortgage "point" is defined as 1 percent of the total loan amount borrowed; for example, a point on a $227,000 mortgage would be $2,270.00. Sometimes points are called "origination" or "discount" points.
- A mortgage lender or broker may charge a point or a portion of a point for a lower interest rate over the life of the loan. The more points paid, the lower the interest rate. The ratio is approximately 1 point per quarter or half a percentage point in the interest rate.
- Buying down points adds to a mortgage's overall closing costs, and is generally not worth it unless, according to Mtgprofessor.com, it "can be viewed as an investment that yields a return that rises the longer you stay in your house."
- To determine whether or not a lender has charged mortgage points, look at the first line item on a good faith estimate. Points will show as percentages of the loan amount going towards a mortgage broker or lender.
- According to 1040.com, when a borrower has paid mortgage points in the home-buying process, he may be able to claim the points paid as an itemized deduction for that tax year.
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