By charging a borrower points, a lender effectively increases the yield on the loan above the amount of the stated interest rate.
[1][2] Selling the property or refinancing prior to this break-even point will result in a net financial loss for the buyer while keeping the loan for longer than this break-even point will result in a net financial savings for the buyer.
Origination fee and discount points are both items listed under lender-charges on the HUD-1 Settlement Statement.
The difference in savings over the life of the loan can make paying points a benefit to the borrower.
The amount of SRP paid is based on the market value of the mortgage note, influenced by several key variables, such as interest rate, loan type, margin (for ARM loans), and the inclusion or exclusion of other items such as prepayment penalties.