{"id":369316,"date":"2016-04-04T10:47:23","date_gmt":"2016-04-04T15:47:23","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/realestate\/mortgages-equity-loans\/interest-rates-mortgage-points-and-fees.html"},"modified":"2024-06-30T17:01:25","modified_gmt":"2024-06-30T22:01:25","slug":"interest-rates-mortgage-points-and-fees","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/realestate\/mortgages-equity-loans\/interest-rates-mortgage-points-and-fees.html","title":{"rendered":"Interest Rates, Mortgage Points, and Fees"},"content":{"rendered":"\n
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Interest Rates, Mortgage Points, and Fees<\/h1>\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Robert Rafii, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

A mortgage<\/a> is a loan used to finance the purchase of real property. Taking out a mortgage may be the most important financial decision of your life, especially if you’re buying a new home for the first time.<\/p>\r\n

A mortgage consists of several important variables, such as mortgage points, interest rates, down payments, and closing costs. These factors determine the monthly payment as well as how much the borrower will pay over the life of the loan. You should also beware of any interest that is tax deductible.<\/p>\r\n

What Are Interest Rates?<\/b><\/h2>\r\n

Like credit cards, mortgage loans have interest rates. The interest rate on a mortgage is the rate the lender charges for borrowing the money for the loan term. The rate varies depending on factors like the borrower’s credit score and economic conditions such as inflation, housing prices, and the demand for mortgages. For example, a higher credit score typically gives you a reduced interest rate to save you money.<\/p>\r\n

For home buyers, shopping for a home loan<\/a> can be confusing because interest rates differ depending on the lender. Interest rates also tend to change daily, depending on the type of mortgage you have, an adjustable-rate mortgage or fixed-rate mortgage<\/a>. A lower interest rate can give you significant monthly savings on your mortgage payments.<\/p>\r\n

What Are Mortgage Discount Points?<\/b><\/h2>\r\n

Mortgage points are a fee paid by the borrower to reduce the interest rate. A borrower can buy mortgage points, an upfront cost, one-time lump sum payment in exchange for a lower mortgage interest rate. This is known as buying points or rate reduction. The example below helps to demonstrate how mortgage points work:<\/p>\r\n

One point is equivalent to 1% percent of the mortgage amount. For a $100,000 mortgage, one point is equal to $1,000. In general, the more points a borrower pays, the lower the interest rate. Points usually range from 0% to 3%.<\/p>\r\n

Disclaimer: This is not to be confused with mortgage origination points, which borrowers pay for the cost of mortgage processing and evaluation.<\/p>\r\n

What Types of Fees Are Part of a Mortgage?<\/b><\/h2>\r\n

Different lenders charge various settlement fees for a mortgage. Typical upfront fees<\/a> include:<\/p>\r\n