What is the difference between discount points and loan-origination points in a 30-year fixed-rate mortgage?
An origination point represents money paid to the originating lender as compensation for preparing the loan and arranging financing. They’re called points because a point represents one percentage point of the loan amount. For example, one point on a $200,000 loan is $2,000. A discount point is prepaid interest. You can lower the stated interest rate on your loan by paying discount points, although paying points will increase the loan’s annual percentage rate (APR). Talk to you lender about whether or not this approach would be beneficial to you. Not likely if you don’t plan to stay in your home.
