One mortgage point equals 1% of the loan amount.  Points are generally used to reduce the interest rate on the mortgage loan, though this is not always true.  If points are reducing the interest rate, the more points that a borrower pays, the lower the interest rate.  A mortgage calculator that analyzes closing costs can measure the impact on the rate and the monthly mortgage payment when paying points.  Often, paying points is optional, but if you plan to stay in your home for a while they may be a good idea.  After utilizing the mortgage calculator to compare costs, shop around with a several lenders to compare the interest rate and point combinations offered.

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