Oct 272006

A means by which lenders vary the yield/return on a mortgage when maximum rates are fixed by law, such as with FHA insured or VA guaranteed loans. Payment of “points” to the lender at the time the loan is made ensures the same return as the lender would have received if the loan were issued at the current interest rate. Discount points also apply to conventional loans and are a fee charged at closing by the lender to increase the yield or interest rate of the loan. These fees are also sometimes called commitment fees. One point is equal to 1 percent of the face amount of the loan.