Definition
Prepaid interest paid at closing to lower the mortgage interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%. On a $350,000 loan, one point costs $3,500. Points make sense if you plan to keep the loan long enough to recoup the upfront cost through monthly savings, usually 4-7 years (the break-even point).
Related Mortgage Terms
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
- Closing Costs
Fees and expenses paid at the finalization of a real estate transaction, typical...
- Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount charge...
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Appraisal
A professional assessment of a property's market value conducted by a licensed a...
Understanding mortgage terminology helps you compare loan offers and make informed decisions. Use our mortgage calculator to see how these terms affect your monthly payment.