Q: My husband and I are going to refinance our home and the lender said something about points.

I don’t think that I paid points with the lender that I have now. Are points good or bad? I don’t understand points at all. Also do you need a lawyer to refinance?

A: A “point” is one percent of the loan amount, typically paid in cash to the lender as a fee. So, if your loan is $300,000, one “point” equals $3,000 paid to the lender.

There are several different kinds of points. There are “discount points,” where every point you pay lowers your interest rate by a certain amount. Sometimes you will pay one percent or one point, and the lender will lower your interest rate from 6 percent to 5.75 percent for the life of your loan.

This can be a good deal if you have the cash and plan to stay in the home and keep this loan for a long time to come.

The lender may charge you a point or two as a flat fee as well. A legitimate lender will typically charge you about 1 percent of the loan amount as a fee, although this is typically made up of all the other fees added together. You don’t usually get charged a point on top of all the other fees.

You do not need an attorney to refinance, but I urge you to really read the documents the lender has given you. If you have any questions at all, or if you don’t understand what the deal is, then call a real estate attorney for further explanation. It’s better to pay for a little bit of time (if your attorney charges you at all and he or she may not), then to get suckered into a lousy loan.

Published: Oct 3, 2005