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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
^
76% - Very Often

Basis Point


Synonyms:origination points, percentage, profit margin
Acronyms &
abbreviations:
BPS
Notes:Used by mortgage brokers and lenders when discussing mortgage rates and determining commissions.
Filed Under: financial-banking, mortgages
Tags: mortgage, mortgage broker, mortgage lender
 

Definition of basis point (BPS)

basis point (BPS)
1. A basis point is a measurement of a percentage: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.

Related Terms and Acronyms:

  • basis   That on which a thing rests or is founded.
  • buy-down   When a borrower or a mortgage broker "buys down" a mortgage rate, they make an upfront payment to the lender in order to lower the mortgage rate. A similar effect can be achieved by making a lump sum payment at the beginning of a mortgage term.
  • buy-down mortgage   A home loan in which the lender charges below-market interest in exchange for discount points.
  • cash method   The form of accounting in which you report income in the actual year you receive it and deduct expenses in the year you pay. Most individuals use this method. Under this system, if you built a deck and billed the client in December 1999 but didn't receive the cheque until January 2000, it would be counted as 2000 income, not 1999.
  • commission (comm)   A fee paid to a salesperson for selling a product to a customer.
  • discount point   A sum a borrower pays to a lender to decrease the interest rate of a mortgage. A point equals 1 percent of the loan amount.
  • margin   The difference between the cost and the selling price.
  • point   A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate.

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