What are Points/Loan Origination Fees?

A loan origination fee or points, is a percentage of the loan amount. They are typically used as a way for the borrower to buy down the interest rate. By doing so,  a lower interest rate is provided for these fees that are paid up front at close of the loan.

If you don't have the available cash, you can get a loan that has less points,but loans with low points generally have higher interest rates. If you have cash available and plan on keeping your loan for many years, then it may make sense to "buy down" the rate with discount points.