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Smarter in 60 - What are mortgage points

An Explanation of How Mortgage Points Can Impact Your Loan

First-time home buyers are often confused over mortgage points. A point is a fee equal to one percent of the loan amount. For example, a $150,000 mortgage would have a one-point rate of $1,500…or one percent of the loan.

Mortgage points are essentially a form of prepaid interest. You can choose to pay this interest up front in exchange for receiving a lower interest rate for the duration of your loan. Mortgage points are often called discount points or mortgage discount points. There is also something called origination points, which are fees that a lender might include as part of your loan. Mortgage or discount points are your choice to make as a borrower, but origination points are not optional.

The more points you pay the lower the interest rate on your loan. If you can afford to pay out the cash at closing, discount points can help you reduce your interest rate, helping reduce your monthly payment.

If you plan on staying in your home for at least four to five years, then paying points to reduce the interest rate makes it worthwhile. It may also help you be approved for a larger loan amount. Mortgage points may be deductible when you file your income tax returns. As your tax preparer for details.

Our Peoples mortgage lenders can help you determine whether mortgage points might help you and what they’ll cost. You can apply online for a Peoples mortgage by selecting a lender or calling 888.929.9902 and asking to speak to a mortgage lender.

photo of Bryan WulkBryan Wulk
Mortgage Lender NMLS# 285738

“I’m thrilled to help customers interested in purchasing or refinancing a home through Peoples State Bank,” said Wulk. “My goal as a mortgage lender has always been to make the home-buying process as easy as possible for my customers.” Wulk joined Peoples in 2022 with 19 years of experience as a mortgage lender, along with an additional six years of experience in retail banking. Wulk assists customers in obtaining financing to purchase a home, refinance an existing mortgage, or set up a construction loan while building their dream home.