What are Discount Points and what are Origination Fees?
Let’s take the second question first. An origination fee is basically a cost for doing business and a very common practice throughout the industry. The fee charge is usually one percent (1%) of the loan amount. In some cases this fee can be waived, by electing to go with a slightly higher interest rate. Discount Points can be utilized in several ways. These, like origination fees, are a percentage of the loan amount used in different ways. Discount Points may represent the cost to buy down an interest rate, to buy out of a prepayment penalty affiliated with certain loan programs, to get you into a particular loan program, and even in lieu of an origination fee for tax purposes come tax time… please consult a CPA or IRS representative for more details.
