what are origination points 
origination is a step by step process that every borrower must complete to obtain a mortgage or home loan meanwhile origination points represent the fees that borrowers pay to lenders or loan officers to compensate for evaluating processing and approving mortgage loans they represent a way to pay closing costs and these fees are negotiable among lenders unlike other types of points e g discount points origination points are not tax deductible 1discount vs origination pointsthere are two types of points discount points and origination points discount points represent interest that is prepaid on the loan and these are tax deductible 1 the interest rate will be lower depending on the number of points a borrower pays as the more points paid the lower the interest rate depending on how much a borrower wants to reduce their interest rate they can pay from zero to four points while discount points represent prepaid interest origination points are the costs that the borrower must pay the lender for extending the loan the cost of the points is tax deductible if it is used for the mortgage and not for closing costs according to the irs if the fee is for items that appear on a settlement statement such as inspection or notary fees the cost is not tax deductible 1origination points vary from lender to lender and a single origination point represents 1 of the mortgage loan for example if an individual is borrowing 150 000 and the bank is charging the individual 1 5 origination points they will pay 2 250 or 1 5 of 150 000 in origination points the fees charged by banks to create the loan are typically 1 origination point or 1 of the amount being borrowed 2example of discount points to reduce paymentwhether a borrower should pay discount points depends on factors such as how much they have to put down as a deposit at closing and how long the borrower intends to stay in the home if discount points are paid to lower the interest rate that s an advantage if the borrower plans to stay in the house for a long time because the mortgage payments will be lower however in many cases it is better to pay zero points and use the money for home furnishings or other investments instead let s consider a hypothetical example using a 30 year fixed rate mortgage from a hypothetical lender lender x as an example of how paying discount points lowers the interest rate it assumes that the rate for a 30 year frm is 4 125 if an individual borrows 300 000 for a new home the interest rate can be reduced to 3 875 by paying 1 524 discount points i e 4 572 or to 4 by paying 0 461 points 1 383 to the lender paying more points will reduce monthly mortgage payments and possibly increase the possibility of having the loan approved as for origination points borrowers should research lenders and inquire about closing costs because they might be able to negotiate the amount paid obviously a borrower wants to minimize the fees closing costs and origination points on the mortgage loan 