What are Mortgage Points?

When negotiating a mortgage, you may have the option to include mortgage points in your package. One mortgage point is equal to one percent of the overall home loan. Whether you are brokering a fixed rate mortgage or an adjustable rate mortgage, negotiating the amount that you pay upfront and the amount that you pay in interest depends on if you are or are not going to pay points.

Discount Points

Discount points are a type of mortgage point that represent that most benefit to the borrower. Usually, for every discount point that you pay, you will decrease the amount of interest that you pay by one quarter. Most companies offer the option to purchase zero to three discount points. Discount points are tax deductible.

Origination Points

Origination points do not benefit the borrower. They are used to pay the overhead costs associated with brokering a home loan deal such as processing and approving fees. The lender/broker makes money from origination points. Origination points are non tax-deductible and vary from lender to lender.