Paying Points /West Hills Ca. / San Fernando Valley Real Estate
Paying Points
When exploring Mortgage options you'll find quotes from lenders that include both loan rates as well as "points."
A point is a fee equal to 1 percent of the loan.
A 30-year, $150,000 mortgage might have a rate of 7 percent, but come with a charge of 1 point, or $1,500.
There are two kinds of points borrowers can pay;
Origination points:
These are charged by the lender to cover the costs of making the loan. They are not tax- deductible.
Discount points:
These are actually pre-paid interest on the mortgage loan.
The more points you pay, the lower the interest rate on the loan and vice-versa. Borrowers typically can pay anywhere from zero to three or four points, depending on how much they want to lower their rates. This kind of points is tax-deductible.
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