You may have heard of points when looking for Santa Cruz real estate. Maybe your loan officer told you that you can trade points for a better interest rate. That sounds good, but just what are points? Let me give you a better idea of just what points are and how they work.
What Are Points?
Points, more specifically discount points, are a percentage of the total loan amount for the house that is pre-paid to the lender. Each point is worth one percent. Your lender may offer a lower interest rate for your mortgage loan if you buy discount points.
What do Discount Points Cost?
The cost of each point is equal to one percent of the loan amount. For instance, for a $200,000 loan one discount point equals $2,000.
For example, you are trying to buy