Mortgages & Loans
In the mortgage process, what are Points ?
The term points refers to a one-time fee that lenders charge at the mortgage closing. Usually, the more points you pay, the lower the interest rate will be. Generally, taxpayers who plan to own the same house for an extended period of time should consider paying more points up front to save thousands of dollars in interest payments over the term of the loan. A point equals one percent of the mortgage loan. (1 point on a $100,000 loan is $1,000). Lending institutions charge points as a way to make a profit. Borrowers may pay discount points to reduce the loan interest rate. Buyers are prohibited from paying points on HUD or VA guaranteed loans. On a conventional mortgage, points may be paid by either buyer or seller or split between them. Generally, points are usually tax deductible as mortgage interest on IRS Schedule A.
Need Professional Help?
If you need help with "Mortgages & Loans" or have other tax questions, we can help you find a local licensed tax preparer for a free, no-obligation consultation.