Each point paid to the lender equals one percentage point of the loan value. Sometimes, the buyer can get a lower interest rate by agreeing to pay more points upfront, or can pay less in points by agreeing to a higher interest rate. The best deal depends on the buyer's available cash and tax status. Mortgage interest is generally deductible on federal income taxes. Banks also charge a variety of other fees that pad their bottom line, according to 10 Steps to Home Ownership by Ilyce R. Glink.
Loan officers say the extra goes to cover office expenses.
Or, they may charge a document preparation fee even though many lenders now process paperless loans via computers and get approval in minutes, Glink says. Be certain that everything you and the lender agreed to is written into the final application. Otherwise you are out of luck. Still, be prepared for some lending institutions to flat-out refuse to negotiate on their fees, leaving you little choice if you want or need to deal with that lender. The number of institutions charging extra fees and the amount of the fees are increasing, according to a recent survey by HSH Associates, which tracks interest rates and other lending trends.