Discount Point

Importance: 0.43

Is a company: no

Is a proper noun: no

Synonyms

  • discount option
  • buy down point

Definition of Discount Point

  1. The sum a borrower pays to a lender to decrease the interest rate for a mortgage. A point equals 1 percent of the loan amount.

Related Terms and Acronyms

  • Point Bank,
    • A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate.
  • Buy-down Definition,
    • When a borrower or a mortgage broker "buys down" a mortgage rate, they make an upfront payment to the lender in order to lower the mortgage rate. A similar effect can be achieved by making a lump sum payment at the beginning of a mortgage term.
  • Buy-down Mortgage Definition, Important,
    • A home loan in which the lender charges below-market interest in exchange for discount points.
  • Basis Point (BPS) Bank, Very Important,
    • A unit of measure: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.
    Used by mortgage brokers and lenders when discussing mortgage rates and determining commissions.
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