What Are Discount Points on a Mortgage?

Discount points, also known as mortgage points or discount fees, are optional upfront fees on a mortgage loan. Discount points are a percentage of the mortgage loan program used to secure a lower interest rate. While these fees may seem costly up-front, they can save you significant money throughout your mortgage loan by lowering your monthly mortgage payments. Whether or not discount points are right for you will depend on several factors, including your mortgage loan amount, interest rate, and financial situation.

What is the purpose of discount points?

One of the primary purposes of discount points is to help you secure a lower interest rate on your mortgage. You are giving the lender a larger down payment in exchange for a lower interest rate on your mortgage by paying extra upfront fees. While these fees may seem like an added financial burden, they can save you significant money throughout your mortgage loan by lowering your monthly mortgage payments.

Is it ever worth it to pay points on a mortgage?

Many factors will determine whether or not paying points on your mortgage is worth it for you. Some key considerations include the mortgage loan amount, interest rate, and financial situation. Ultimately, the decision will depend on your unique financial goals and how much you can afford upfront.

How Many Points Can I Buy on a Mortgage?

The maximum amount of points you can buy down a loan is 3%. That means that for a mortgage loan of $100,000, you could pay up to $3,000 in mortgage points. However, the amount you will pay will depend on how much your mortgage lender is willing to offer in terms of a discount, the current mortgage rate, and your financial situation.

Can You Negotiate Points on a Mortgage Loan?

Yes, you can negotiate mortgage points with your mortgage lender. While lenders base mortgage rates on market conditions, mortgage points are more individualized and are adjustable to meet your specific financial needs. Researching and shopping around with different lenders is vital to find the mortgage loan with the lowest discount points that are right for you.

Discount Points at DFW Lending, LLC

At DFW Lending, LLC, we are a Dallas hard money lender that offers discount points as part of our flexible mortgage loan offerings. However, we build it into loans as origination fees. The maximum origination fee is only 2%-3$ of the loan amount. We can help you find the mortgage that meets your needs with discount points and other options. Whether you are buying an investment property for the first time or are a seasoned pro, we have a mortgage solution.

Final Thoughts on Discount Points

Discount points ultimately come down to your situation. If you plan to stay in your home for an extended period and are looking to secure the best mortgage rate possible, then paying mortgage points may be right for you. However, if you are concerned about upfront costs or plan to move within a short time frame, there may be better choices than mortgage points. Ultimately, the decision is up to you and your financial goals, so it is essential to carefully consider your options before making a decision.