Most people think points are as simple as 1% of APR, but that's just what other lenders want you to think. This is true if the loan is paid off after more than 1 year, but anything shorter and that single point begins to grow. Because a point is paying 1% of the total cost of the loan upfront (money you can never get back), it's effective APR increases the quicker you pay off the loan. Hence, a point paid off in 6 months becomes 2% effective APR, and a point paid off in 3 months becomes 4% effective APR. If you plan to pay the point over a year then it's no big deal, but when it comes to real estate investing this timeline can be rare. Watch the video above to see why points are important to understand as well as find out Bench Equity's opinion on points.