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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Discount Point


Synonyms:buy down point, discount option
Filed Under: mortgages
Tags: mortgage
 

Definition of discount point

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:

  • basis point (BPS)   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.
  • buy-down   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   A home loan in which the lender charges below-market interest in exchange for discount points.
  • point   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.

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