How Do Mortgage Points Work?

We often get asked, “how do mortgage points work?”. Mortgage points are simply a percentage of your loan amount. If a lender quotes you three points, it means 3% of your loan amount. So, if your loan is $100,000 with three points, that means it’s a $3,000 fee.

Points are frequently referred to as origination fees, and that’s where you would see them on a settlement sheet. Points impact your profit and they are something that you have to build into your finance model in order to see if a project is going to be profitable for you.

Points are just a cost of doing business.

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