What percentage of the mortgage loan amount does a point represent?

A point in the context of a mortgage loan represents 1% of the total loan amount. This is a standard measurement used in mortgage financing, often referred to as "discount points" or "origination points." When a borrower pays points, they are essentially paying a fee that is equal to a percentage of the loan to secure a lower interest rate or cover closing costs.

For example, if someone takes out a mortgage for $200,000 and pays one point, that would amount to $2,000. This mechanism is crucial for borrowers to understand as it can impact the overall cost of financing the mortgage. Since one point equals one percent, it’s an essential concept in both mortgage calculations and financial modeling related to lending practices.