Points are pre-paid interest payments made to your mortgage lender at closing. A point is 1% of the mortgage loan value. If your lender requires you to pay 3 points on a $150,000 mortgage for example, your payment would be $4,500.00
Points are a fee you pay in exchange for a lower interest rate. Do you have to pay them? If you have stellar to good credit you can find lenders that will not require points on your loan. Even with average credit and a little legwork you should be able to find a mortgage that does not require points. Make sure the points you pay are going to the lender in exchange for the interest rate and not padding the pockets of your mortgage broker.
You can negotiate with lenders to remove the points from your loan. The mortgage marketplace is extremely competitive; by shopping from a variety of mortgage lenders you should be able to find a lender willing to forego points.
If your lender is not requiring you to pay points on your mortgage and you have the cash on hand you might be able to negotiate for a lower interest rate by offering to prepay points on the loan. The money you save over the life of the mortgage could make it worth you while to pay the points upfront.
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