Points are fees that are charged by lenders when a loan is given. One point is equal to one percentage of the loan’s total amount. Consider that you are in the market for a new home and have just located a large luxurious property that is perfect for your family. The home is available for an astounding price and will be yours for a mere $100,000. You approach your neighborhood lender for a mortgage, and the friendly banker grants your request. You get a loan for $100,000, but you also are charged three points by your banker. This means that your new loan is now $103,000. This is the original amount that you needed plus the three points the lender charged. The $103,000 does not include any interest. It is just the original balance plus the points that you must pay.
