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Definition of discount Point from Mortgage Glossary

Discount Point Fees paid to lenders. 1 point = 1% of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points. In laymen terms, a point is a fee you pay to a lender or broker. Each point is one percent of the amount of the loan. Lets suppose you are getting a mortgage for $100,000.00 and the lender is charging you two points. $100,000.00 x .02 equals $2000.00. The total dollar amount of points you will pay is $2000.00 In the mortgage industry, these points are commonly referred to as front end points. If you are working with a broker, and they are working to find you a lender, the lender will reward the broker for bringing the loan to them with what they call back end points. The back end points will affect your interest rate. Lets suppose your broker is kind enough to give you a rate without making any money from the lender. The lender calls this the par rate. Now lets suppose the par rate is at 5%. Now lets suppose the broker wants to make a little cash from the lender. The broker will say to the lender, what will pay me a point? This is where the rate begins to go up The lender will say, if you want to make a point, than the rate will go up to 5.5%, and if you want to make two points, the rate will go up to 6%. You will end up with this rate. So when the time comes to start going over fees with your lender or broker, make absolutely sure you ask about the back end points to be sure you are getting the best rate possible. Also, be sure to scrutinize the documents they send you before signing, especially the good faith estimate. (GFE) Closing Costs				You'll be re-directed to Loan Savings Solution Web Site
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