What does one point equal in terms of loan charges?

One point in the context of loan charges is defined as equal to 1% of the loan amount. This is a standard term used in the real estate and mortgage industry. Points are typically used by lenders to adjust the interest rate of a loan. For instance, if a borrower is taking out a loan of $200,000, one point would equate to $2,000. The borrower might choose to pay points upfront to reduce the overall interest rate on the loan, leading to lower monthly payments.

Understanding this concept is crucial for both borrowers and real estate professionals, as it directly affects financing costs and overall loan terms during the home-buying process.