What are points?
Points are costs that need to be paid to a lender in order to receive mortgage
financing under specified terms. A point is a percentage of the loan amount
(one point = one percent of the loan). One point on a $100,000 loan would be
$1,000. Discount points are fees that are used to lower the interest rate on
a mortgage loan (you are discounting the interest rate by paying some of this
interest up-front). Lenders may express other loan-related fees in terms of
points. Some lenders may express their costs in terms of basis points (hundredths
of a percent). 100 basis points = 1 point (or 1 percent of the loan amount).