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Getting to the

Clients always ask about mortgage loan “points,” what they do, and how they are calculated. In the mortgage business, a “point” equals 1 percent of the loan amount. For example, on a $300,000 loan, one point is 1 percent of $300,000, or $3,000. On a $100,000 loan, one point is 1 percent of $100,000, or $1,000. Points can be paid by the borrowers, which gives them a lower interest rate than would otherwise be applicable to their credit, employment and asset information. Or, in exchange for a higher interest rate, points can be rebated by the lender to the borrowers, which provides funds to help defray loan settlement charges. Lower rates come with paying points. Higher rates come with lender rebates. Lower rate/higher point loans fit borrowers with enough money to meet the cash requirements, who intend to keep the loan for a long period of time (more than five years), or who want to reduce their monthly payment. Higher rate/lower point loans fit borrowers who are short on cash, expect to be in the house for a short period of time, or who don’t need a monthly payment lower than the current rate. All lenders and mortgage companies offer a variety range of interest rate/point combinations. Borrowers can choose the combination that is most advantageous for their particular situation. Call a mortgage broker to determine which option fits you best. It only takes a few minutes to do the math to compare the different options. The information will be very useful to you.All lenders and mortgage companies offer a variety range of interest rate/point combinations. Borrowers can choose the combination that is most advantageous for their particular situation. Call a mortgage broker to determine which option fits you best. It only takes a few minutes to do the math to compare the different options. The information will be very useful to you.


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