Discount Point
Definition
- 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.
Synonyms
buy down point, discount option
Related Terms and Acronyms
- Basis Point (BPS) — Acronym, 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. - 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.
- Point — Definition,
- 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.
