What are origination and discount points?
One point origination or discount = 1% of the loan amount. Discount points on conventional loans are used to improve your interest rate. For example, a lender may charge an interest rate of 8.5% with no discount points and an interest rate of 8.25% with 1% discount point. On a $150,000 loan the 1% discount point would cost the borrower $1,500. By paying the 1% discount point, the interest savings would be $9,529.20 over thirty years. Every borrower’s situation is different, therefore, you may want to consider the length of time you plan to own the home in determining whether or not it is worth paying the discount points.
