Loan Points (Origination Fees) paid for a lower interest rate is a trade off between paying money now versus paying money later.  A point - equaling 1% of the total loan amount - is an upfront fee that reduces your monthly interest rate and total interest due over the life of a loan.  Use our calculator to figure out the cost and effective saving of loan points as well as the minimum amount of time it will take to recover your loan points. 

Points are an upfront charge by the lender that is part of the price of a mortgage. Points are expressed as a percent of the loan amount, with three points being 3 percent. On a $100,000 loan, three points means a cash payment of $3,000. Points are part of the cost of credit to the borrower.

Loan Points are the gross profit for the originator of the loan. This covers salaries, building lease, employee benefits, unexpected expense, or they can be used to lower your interest rate. One Point equals one percent of your loan amount. Points are broken down into two types.

1. Origination Points (or Fee) - This is the gross profit for the Lender.
2. Discount Points (or Fee) - This is commonly used to cover the cost of giving you a lower rate.

If you paid points, the amount should be listed on the 1098 statement from your lender. This document also notes how much mortgage interest you paid. Both of these deductible amounts go on line 10 of Schedule A . (If the points aren't on that statement, but show up elsewhere -- for example, on your closing documents -- enter them on line 12.