{"id":472,"date":"2019-10-09T18:03:07","date_gmt":"2019-10-09T18:03:07","guid":{"rendered":"https:\/\/bundleloan.com\/blog\/?p=472"},"modified":"2021-06-21T18:07:55","modified_gmt":"2021-06-21T18:07:55","slug":"discount-points","status":"publish","type":"post","link":"https:\/\/bundleloan.com\/blog\/discount-points\/","title":{"rendered":"Discount Points"},"content":{"rendered":"<p>Discount points are fees home buyers pay at closing for a lower mortgage interest rate. One point equals 1% of the loan amount. Banks typically can offer lower interest rates if the home buyer is willing to pay more upfront.<\/p>\n<h3>Here&#8217;s an Example<\/h3>\n<p>Let&#8217;s say you are shopping around for your mortgage and a loan officer quotes you 4.00% on a $200,000 with no discount points. You can ask them for a lower interest rate, but this isn&#8217;t free! They will charge you discount points to offset the lower interest rate. The loan officer might say, &#8220;I can offer you a 3.75% interest rate with a 1 point discount point.&#8221; That means you&#8217;ll have to bring an extra $2,000 ($200,000 loan amount X 1%) to the closing table.<\/p>\n<h3>When Should You Pay a Discount Points?<\/h3>\n<p>The difference in your payment in the example above is $29 a month (Principal and Interest of $955 versus $926). You should only pay the discount point if you plan on living in the house long enough to recoup the $2,000 with lower payments. In order to see how many months that is, just divide the discount point by difference in payment. In this case $2,000 \/ $29 = 69 months. If you plan on living in the house for less than 5 years and 9 months you should not pay the discount point.<\/p>\n<p>Even if you plan on being in the home longer than 5 years and 9 months, there&#8217;s a chance you might refinance your mortgage or move unexpectedly so take those factors into consideration when making your decision. If you are taking out a mortgage in an unusually low interest rate environment (lower chance you&#8217;ll refinance) and plan on living in the house for 10 years, you should seriously consider paying the discount point.<\/p>\n<p>At <a href=\"https:\/\/bundleloan.com\/\">Bundle<\/a>, we recommend that you stay in your home for at least 4 years to offset normal swings in the housing market and to spread your <a href=\"https:\/\/bundleloan.com\/blog\/mortgage-closing-costs\/\">closing costs<\/a> over a longer period of time.<\/p>\n<p>Read more on monthly mortgage mortgage payments <a href=\"https:\/\/bundleloan.com\/blog\/your-monthly-mortgage-payment-an-important-decision\/\">here<\/a>.<\/p>\n<p>Use <a href=\"https:\/\/bundleloan.com\">Bundle<\/a> to find your mortgage today.<\/p>\n<p>Read more <a href=\"https:\/\/bundleloan.com\/blog\/key-mortgage-terms\/\">Key Mortgage Terms<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Discount points are fees home buyers pay at closing for a lower mortgage interest rate. One point equals 1% of the loan amount. Banks typically can offer lower interest rates if the home buyer is willing to pay more upfront. Here&#8217;s an Example Let&#8217;s say you are shopping around for your mortgage and a loan [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,20],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Discount Points - Bundle<\/title>\n<meta name=\"description\" content=\"Discount points are fees home buyers pay at closing for a lower mortgage interest rate. 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