Fees vs discount points

Aren't points, like mortgage interest, tax deductible?

Points are definitely deductible, but some other closing fees are also. Is this the only difference though?

When you say $5000 in fees, what do those fees encompass.

Then when the other lender says one point, are there additional fees? I would think so.

It was just a hypothetical but these situations are similar to some of the rates I have already been quoted.

Good afternoon firstimebuyernyc2012,

I'm really happy you're shopping around and comparing fees from one Lender to the next. The revised Good Faith Estimate that HUD instituted encourages ON THE FORM exactly this type of behavior on the part of consumers.

Unfortunately you're seeing the other side of "quote 'em 'til they drop" syndrome in mortgage sales. Seems you can't get a straight answer.

Here are three key points to guide you:

1. POINTS: if the points are true "Discount" points then by paying points you are obtaining a lower interest rate with that Lender because you're effectively paying some interest at closing and thus "discounting" your interest rate for the next thirty (or 15 or whichever) years. Question the Loan Originators if "Points" being disclosed to you are Discount, or not. If they ARE Discount, ask the same L.O. for the Zero-Points option. You should see a slightly higher interest rate. Traditionally when a Borrower pays ONE Discount Point (One percent of the loan amount) the interest rate is lower by .25% (assuming market conditions are stable and tranquil).

2. FEES: Each Lender has unique fees. These include, but are not limited to, Origination fee (which can equal in some cases 1% or One Point), Bank Attorney fee (for New York purchases/refinances), Application fees, Document prep fees, Underwriting and Processing fees, and etc., ad nauseum. When comparing fees from one Lender to another it's important to have all the fees broken down. For example, I've seen an estimate from a national mortgage Lender with an origination fee of $650. But they then pile on a bunch of the smaller fees which in the end totals out to about $1500. By comparison, another lender I've seen charges only an origination fee of $1800 but NOT the smaller fees. Get a breakdown from the L.O.

3. APR: Annual Percentage Rate. The BEST way to compare fees is to check the APR. REQUIRED by Federal regulations is this: if I send you a rate quote I MUST include an APR in equal font-size and immediately next to the interest rate quoted (in other words, NOT in the fine print). APR includes all the Lender's fees added to the actual interest rate of the loan (the effective rate) and calculated over the term of the loan to derive an Annual Percentage Rate.

I hope that helps you clear the air as you shop for your mortgage loan.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528

*I include my full contact information because I am required to do so by NYS regulations.