Points (Origination Points)
Upfront fees paid to a lender, equal to 1% of the loan amount per point.
Definition
Points (also called origination points, discount points, or loan fees) are upfront fees charged by a lender at closing, equal to 1% of the loan amount per point. Two points on a $100,000 loan = $2,000 in fees.
Discount points are paid to permanently reduce (buy down) the interest rate — typically 0.25% per point. Origination points are simply fees the lender charges for making the loan. Hard money and bridge lenders routinely charge 2–4 points; conventional lenders may charge 0–2 points.
For investors, points are a real cost that must be factored into deal analysis — especially on short-term loans. A 3-point origination fee on a 6-month flip loan effectively adds 6% annualized cost to the loan, on top of the stated interest rate. Always calculate the all-in cost of capital.
Related Terms
Hard Money Loan
Short-term, asset-based loans from private lenders — used for acquisitions and rehabs when speed matters.
Closing Costs
Fees and expenses paid at settlement when a real estate transaction is finalized.
Bridge Loan
Short-term financing that bridges the gap between purchasing a property and securing permanent financing.
Private Money
Loans from individual private investors — usually friends, family, or high-net-worth individuals — secured by real property.
Also in "P"
PITI
Principal, Interest, Taxes, and Insurance — the four components of a monthly mortgage payment.
Pro Forma
A financial projection document showing expected income, expenses, and returns for an investment property.
Purchase Agreement
The legal contract between buyer and seller that outlines the terms of a real estate transaction.