What are points?

A point is a percentage of the loan amount, or 1 point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up front. Lenders may refer to costs in terms of basis points in hundredths of a percent; 100 basis points = 1 point, or 1% of the loan amount.