Settlemyalldebt’s Blog

9.75% / 1 point. It looks like some new age math formula to the untrained eye but those who have been searching for a mortgage loan know otherwise. In actuality, “X% / Y points” is how Canadian mortgage lenders express a loan amount offer. Using the initial example above, most people understand that the 9.75% is the mortgage rate that will be applied to the mortgage loan. The “1 point” that follows is what stumps them. What about you?

Specially a mortgage point is nothing but a fee associated with the loan. However, it’s not as same as the interest rate. While the interest rate is a cost which a borrower obtains throughout the life of a loan for borrowing money, a point is a fee which a mortgage lender require in return of extending a mortgage loan to a borrower.