Points (Mortgage Discount Points)
Definition:
Mortgage Points, also known as Discount Points, are fees paid by the borrower at closing in exchange for a lower interest rate on their mortgage. One point typically costs 1% of the loan amount and reduces the interest rate by a fraction, making monthly payments lower over the life of the loan.
🔍 Did You Know?
Paying points can be a good strategy for borrowers who plan to stay in their home long-term, as the savings on interest over time can outweigh the upfront cost.
Examples:
Example 1:
A borrower pays $2,000 (one point) on a $200,000 mortgage to lower their interest rate from 4.5% to 4.25%, reducing their monthly payment and total interest paid over the life of the loan.
Example 2:
A homebuyer chooses to pay for two discount points at closing, costing $4,000, to lower their interest rate and save money over the course of a 30-year mortgage.
Why It’s Important:
Paying points can help lower the overall cost of a mortgage by reducing the interest rate, making it a valuable option for borrowers planning to stay in their homes for an extended period. It can also provide short-term relief by reducing monthly payments.
Who Should Care:
- Homebuyers seeking lower long-term interest costs.
- Real estate investors looking to reduce mortgage expenses.
- Lenders offering borrowers the option to buy down rates.
The open real estate company
Picket is on a mission to make real estate open, efficient, and fun for all
Try Picket
Picket Team
Create Your Picket Account
Open {pricing} API
Already have your own system? No problem. Try Picket's API instead.
Developer Docs
