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What Are Discount Points?

A “point” is expressed as a percentage of the amount borrowed and expressed in 1/8th increments in decimal form. One point, or 1.00, is $3,000 on a $300,000 loan amount. 0.50 point is one-half a point and would be $1,500 on a $300,000 loan.

The decimal equivalents of points are :

.125= one-eighth of one percent
.25= one-quarter of one percent
.375= three-eighths of one percent
.50= one-half of one percent
.625= five-eighths of one percent
.75= three-quarters of one percent
.875= seven-eighths of one percent
1.00= one point

The more points paid, the lower the starting rate for each mortgage program. Lenders offer rates with points and loans without and it’s completely up to the borrowers whether or not there will be points at the settlement table. Lenders have no preference whether or not you pay points. When loan officers are issued their interest rate sheets each morning, there will be a variety of available rates listed for each loan type. From a 30 year fixed to a 5/1 hybrid ARM, there will be choices borrowers can make regarding which rate to choose and if there will be any points paid for the selected rate.