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CHAPTER V -- DON'T BE SURPRISED BY THESE COMMON ADDED COSTS

LESSON 9: POINTS

When people want to find out how much their mortgages cost, lenders often give them quotes that include both loan rates and "points." In an ideal world, they're told about closing costs, too, but we'll talk more about that in Lesson 21. So, what exactly is a point?


In the simplest terms, a point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent, but come with a charge of 1 point, or $1,500. ($150,000 X 0.01 = $1,500)

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But there are two kinds of points borrowers can pay:
Discount points: These are actually prepaid 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 point is tax-deductible.


Discount points show up in the Annual percentage rate (APR) calculation. You pay these points at closing -- which increases the money you need to bring to the transaction.

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TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





RELATED STORIES

Tax breaks available for home loan points

Points or no points?

Details on points

 
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