What are points and origination fees?

calculator money┬áIn IRS Publication 936, both are considered “pre-paid interest” paid at closing one-time to get the benefit of a lower interest rate.

Some lenders use the term “total points” to include origination fees and discount points, but not all lenders use the term to mean the same thing, so be sure you understand what they are referring to so that you know what your costs will be. Ask for a lender worksheet to get a breakdown of the fees you will be charged.

Whether to pay origination fees or points to get a better rate depends on your situation, but you should base that decision on the time you plan to keep the home and the rate of the mortgage you are getting. Ask any of the mortgage providers on this site for advice on this issue. They should be able to advise you about your particular situation.

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