What term describes certain charges that a borrower pays to obtain a home mortgage?

The term that describes certain charges that a borrower pays to obtain a home mortgage is "points." Points, or discount points, are essentially upfront fees that a borrower can pay to reduce the interest rate on the mortgage. Each point typically represents 1% of the loan amount. For instance, if a borrower takes out a $200,000 mortgage and pays two points, they would pay $4,000 upfront to lower their interest rate.

Points serve two primary purposes: they help in reducing monthly mortgage payments by lowering the interest rate, and they can also affect the overall cost of the loan. It’s important for borrowers to understand the trade-off involved when paying points—the upfront costs versus long-term savings through reduced interest. This differentiates points from the other choices, which may refer to various costs and fees involved in mortgage transactions but do not specifically highlight the same concept of prepaying interest to lower long-term costs.