What is a Lending Point – A Homebuyer’s Tip

What is a Lending Point? 

A lending point is a fee that a home buyer pays to the lender in exchange for a lower interest rate. This is called “buying down the rate.” In essence, you pay some interest up front in exchange for a loan with a reduced interest rate overall. One percent of the entire loan amount is required to purchase each point.

The points system is calculated based on the loan amount, and each one of them represents a percent of the loan. For instance, if a $100,000 loan has a $1,000 balance, the points would be around one percent.

So make sure when you are looking into buying a home, you have open communication with your agent and lenders about what you’re willing to pay when it comes to points.

Want to know more tips for your homebuying journey? Visit this link to learn more and what to expect on your homebuying journey in Burlington, Vermont.