what is a LOAN point??

Answer 1

1 percent of the loan amount.
So if you get a mortgage of 300K a point would cost you 3,000 but might save you over the 30 years by getting you a better interest rate.

Answer 2

Points are also called "loan origination fees". And, as the others have pointed out, 1 point = 1 percent of the loan amount.

Lenders charge points to buy down the interest rate of a loan. You have probably heard of those mortgage companies on the radio or whatever who say they are still only charging 5.5% while everyone else is up to 6.5%. Well, to get that 5.5% rate, they will charge you at least 3 points (3% of the loan amount) in origination fees.

On a $500,000 loan, for example, the difference in monthly payments between 6.5% and 5.5% is about $320 a month. To get that savings, they will charge you 3% of the $500,000 or $15,000 to be able to save that $320 a month.

In theory, this would save you $115,200 in payments over a 30-year mortgage (or about $100,000 versus paying the points). But, industry statistics show that the average mortgage only lasts about 5 years before it is paid off or refinanced. So, if you sell or otherwise pay off the loan before about 4 years (the time you will have broken even on $320 a month higher payments versus paying $15,000 up front), you lost money by going with the lower interest loan and paying points.

By the way, like interest payments on a mortgage, points and penalties for early payoff of a loan are tax deductible.

Answer 3

It is one percent of the loan amount. So for a $100,000 loan one point is $1,000. You would have to pay $1,000 at closing to get the loan at the advertised rate.