The difference between mortgage points that are paid and those that are financed is irritatingly subtle and. in terms of money exchanged at closing, irrelevant. For example, consider this scenario presented in testimony before a House Ways and Means subcommittee by the Savings & Community Bankers of America:

Suppose the sale price of a home is $130,000 with a $30,000 down payment. A thrift agrees to lend $1 00, 000 at a specified interest rate plus two points. At closing, the buyer will promise to pay the lender $100,000 and the lender in turn gives the seller $98,000. The borrower. meanwhile, will present a $32,000 check--$30,000 for the down payment and $2,000 for the points. The seller gets $98,000 from the lender and $32.000 from the buyer to total $130,000.

After the closing, the buyer could argue that he or she paid the points in cash. At the same time, though, the lender could argue that it was financing the points because it will take the life of the loan for it to recoup the $2,000 that went straight to the seller rather than to its vaults.

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