So….What Exactly Are Discount Points?

Most often referred to as just-plain “points”, discount points are an up-front fee charged by a mortgage lender in exchange for a lower mortgage rate.

The dollar value of one point is one percent on the loan size.  Discount points appear on Good Faith Estimates and HUD-1 Settlement Statements on Line 802.

Historically, each 1 point paid by a borrower lowers an offered interest rate by a quarter-percent.  Since the late-2008, however, this relationship is skewed.

Depending on market conditions, 1 point paid by a borrower can lower a mortgage rate by up to 0.875 percent.

As an example of how points work, a $200,000 home loan may be offered at 5.500 percent with 0 points.  With 1 discount point paid at closing — $2,000 — the mortgage rate may lower to 5.125 percent.

In addition to lowering your interest rate, discount points may be tax-deductible, too.  Therefore, be sure to provide your home settlement statements from the previous calendar year to your accountant during Tax Season.

I recommend calling Tracie Griffith with First Community Mortgage located inBlue Ridge, GA. Tracie has always taken very good care of my customers and clients lending needs. So, if you have any questions about a Home Loan, or further information on Discount Points, please give her a call at 706.632.5800. Please let her know you found her on “The Porch!”  Oh by the way, if you haven’t found that North Georgia Mountain Cabin, please Contact Me or give me a call at 706.994.8686 for all your Blue Ridge, Blairsville, Ellijay, or Hiawassee Real Estate needs. I would greatly appreciate it.

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