What is the primary difference between "points" and "fees" in mortgage financing?

The primary difference between "points" and "fees" in mortgage financing is that points are upfront fees that borrowers pay to reduce the interest rate over the life of the loan, whereas fees encompass a variety of closing costs associated with obtaining the mortgage.

Points, often referred to as "discount points," are typically expressed as a percentage of the loan amount. By paying points upfront, borrowers can effectively lower their monthly mortgage payments, as they are securing a lower interest rate for the duration of the loan. This can make points a strategic choice for borrowers who plan to stay in their home for an extended period, as the initial cost may result in significant savings over time.

On the other hand, fees include a range of costs necessary to complete the loan transaction. These may include loan origination fees, appraisal fees, title insurance, and other costs that do not directly affect the interest rate but are essential for finalizing the mortgage. Understanding the distinction between these two elements is crucial for borrowers as they navigate their financing options.