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When should a Borrower Pay Points?
When Should a Borrower Pay Points?
 
 
     "Points".  One of the most oft-spoken terms when speaking with borrowers about their mortgage application.  Also one of the most misunderstood concepts that borrowers have with the mortgage industry.  I blame the media for this.  I also blame lenders & loan officers for not effectively communicating just how much has changed in our industry over the past few years.  I also blame Realtors & financial advisors for not fully understanding the concept yet still offering advice, advice that often gets stuck in a borrowers head & leads them to make poor financial decisions.  Let's break it down and see if I can explain "points", when they're necessary, and when they should be avoided (it would come as a surprise to most that the answer to 'when they should be avoided' is NOT "always")
 
 
     A "point" in the mortgage industry, on its most basic level is easy to understand.  Quite simply, 1 point is equal to 1% of a borrowers loan amount.  A half point?  Half a percent.  On a $100,000 loan, 1 point is $1,000.  On a $500,000 loan amount, 1 point is $5,000.  Simple enough, right?
 
 
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