Discount Points

The name alone sounds enticing doesn’t it? I mean, who wouldn’t want a discount…ESPECIALLY on the largest purchase most of us will ever make! But what exactly are discount points and how do you get them?

Discount points (also know as closing or mortgage points)are a type of prepaid interest that mortgage borrowers can purchase to lower the amount of interest they will have to pay on subsequent payments. Just like with origination points, 1 point is equal to 1% of the total loan. So, on a $100,000 loan each point would be equal to $1,000. Each point you pay can lower your interest rate from 1/8 to 1/4 of a percent. Another great thing (as if lowering your interest rate wasn’t enough) is that discount points are also tax deductible in the year that they are paid.

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One response to this post.

  1. discount points
    are paid to lower the mortgage rate, which in turn reduces the mortgage payments. If you pay more discount points, it implies that you pay more at the present times. Again, if you pay less discount points, it implies that you pay more in future.

    Reply

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