What Are Discount Points?

 

Discount points allow you to lower your interest rate. While this video simplifies things to help you remember, “points” 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.

When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid.

Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment.

Points are tax-deductible when you purchase a home, and you may be able to negotiate for the seller to pay for some of them.

CARING ABOUT THE COMMUNITY. FIRST.