mortgage loan points
4. Loan points
"Points" are an amount of money you pay to reduce the interest rate on your loan. One point is 1% of the amount you are borrowing. If the mortgage interest rate is high, the points will probably be low, or even zero points. If the interest rate is low, the points will probably be high. The range of points paid to get a mortgage is usually zero to 3. Here again, there are no free lunches. You simply have to decide whether you want to pay the points up front, and have lower monthly payments, or not pay the points and have a higher monthly payment. If you are having trouble qualifying for the amount of money you want to borrow, and just happen to have a few thousand dollars free, you might elect to pay some points to get a lower interest rate so you can qualify for a larger mortgage.
Typically, each discount point you pay reduces the interest rate on a 30-year fixed rate mortgage by about 1/8%.
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