What Are Discount Points?
Discount points are pre-paid interest on your mortgage, charged up-front at the time of closing. One point is equal to one-percent of the loan amount. Paying discount points upfront will lower the interest rate over the term of the loan. It generally does not make financial sense to pay points up front, even though they might be eligible as a tax write-off on your taxes.
Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment.
A discount point is a fee that you can pay to reduce your interest rate. One “point” equals 1% of the loan amount. For example, one point on a $100,000 loan would equal $1000. If you’re going to be in your home for a relatively short period, it may not be worth it to you to pay discount points. If you would like to lower your monthly payments by lowering your interest rate, then paying points up front may be the best way to accomplish this.
A discount point is a fee that you can pay to reduce your interest rate. One “point” equals 1% of the loan amount. For example, one point on a $100,000 loan would equal $1,000. If you re going to be in your home for a relatively short period, it may not be worth it to you to pay discount points. If you would like to lower your monthly payments by lowering your interest rate, then paying points up front may be the best way to accomplish this.
