Mortgage points (or Discount points)
Mortgage points are charges paid to the lender directly at closing, in exchange for a decreased interest rate. This can reduce your mortgage payments every month. One point is equivalent to a 1% charge of your mortgage. Mortgage lenders often charge points to make an instant profit from refinancing.
A refinance for a mortgage generally leads to out-of-pocket costs to take account of items like lender fees or services of third parties. Principally, no-cost refinancing means that you do not pay such charges directly. Lenders can offer borrowers an optional no-cost refinancing to decrease the amount of money needed to be paid upfront.
In hope for a higher return of interest rates, lenders offer to cover refinancing costs for their clients.
Also, refinancing costs are sometimes added to the refinanced loan. All of these could lead to a more significant long-term mortgage rate costs compared if you paid for the refinancing out-of-pocket.
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