Discount Points

Discount Points

Discount points, commonly referred to as points, are a form of prepaid interest on your loan that can help lower your overall interest rate. These points are payments made upfront during the closing phase of a mortgage transaction.

One point equals 1% of the total mortgage amount and typically reduces your interest rate by approximately 0.25%. Additionally, the cost of discount points is tax-deductible in the year they are paid, which can provide an extra financial benefit.

As a borrower, you may find it advantageous to pay for discount points, as this can lead to lower monthly payments over the life of the loan. However, it’s essential to remain committed to the loan for the entire term to fully benefit from the decreased monthly payments and to recoup the costs associated with the points.

Lenders also gain from this arrangement, as they receive money upfront rather than relying solely on monthly interest payments. In the event of a loan default, lenders face less risk of loss because they have already collected some of the interest in advance.

Cash-Out Refinance

A cash-out refinance means you swap your current mortgage for a new one with a bigger loan. This lets you access the home equity you’ve built up over time.

Streamline Refinance

The FHA Streamline Refinance helps homeowners lower their interest rate and monthly payments on an existing FHA mortgage with a simplified process.

Lender

Your lender is the person or institution that gives you a mortgage loan to buy a home. You agree to make regular payments, plus interest, to repay the loan.

Equity

Home equity is the portion of your home that you own. It increases as you make mortgage payments, showing you own more of the property over time.

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