What Are Points and When Should You Pay Them?

Origination and discount points are often misunderstood. They are both fees that may be charged at the time of closing. Some lenders even interchange the labeling of these fees.

In formal terms, lenders charge origination points, while discount points are monies paid at the time of closing to obtain a discounted interest rate on a home loan.

A “point” is equivalent to 1 percent of the loan amount. For example, one point on a $300,000 loan amount is $3,000. Paying a full point on a home loan does not guarantee an entire 1 percent decrease in the final home loan interest rate.

While a lower interest rate may result in a lower monthly payment, it is important to consider how long you intend to be in the home and how long it will take to recoup any points paid. This will help you to determine whether paying points makes sense for you.

Ultimately, there is a lot to consider when it comes to paying points and whether or not doing so is a worthwhile investment. An experienced loan professional can work with you to determine the best course of action. A comprehensive cost comparison can be financially beneficial to determine any benefits from paying points.

If you or someone you know would like to learn more about points and available home loan options, please get in touch. I’m happy to help!

For professional use only. Not intended for consumer distribution.
Information is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. West Coast Mortgage Group is not affiliated with the U.S. government, HUD, FHA, VA, or any other government agencies. For additional information about West Coast Mortgage Group, visit the NMLS Consumer Access page at www.nmlsconsumeraccess.org. NMLS #5084.

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