Points are also called discount points, mortgage points, loan discount points, loan origination fees, and maximum loan charges. A point is equal to 1 percent of the loan amount. For example, one point on a loan of $150,000 is $1,500. Lenders consider mortgage points as interest that you pay in advance. As a result, the more points you pay when you close the loan, the lower your interest rate. If you qualify, you may be able to deduct mortgage points in the year you close the loan for tax purposes. Otherwise, you will have to amortize the points paid over the term of the loan.
