Mortgage Points - What are discount vs. origination points?

What are Mortage Points?

      Other Mortgage articles:

           - Choosing a Mortgage
           - Types of Mortgages
           - What are Mortgage Points?
           - Refinancing

On a very basic level a point is 1 percent of the total amount loaned in the mortgage. There are two types of points that you may pay when you get a mortgage:

Origination points:

Also called the origination fee, origination points are the fee or cost that is paid to the lender for obtaining the loan. This is where your mortgage broker makes their money. This is often one of the biggest parts of the closing costs. Sometimes the origination fee may include other closing costs like document preparation costs or notary fees. The portion of the origination fee or points that is charged specifically for obtaining the loan is often tax deductible, but you would need to check with your mortgage broker and tax advisor to be sure.

Discount points:

These points make up the amount of prepaid interest you can make on the mortgage. Each point is one percent of the loan. For example, if you got a $100,000 loan with 1 � discount points you would need to pay $1500 up front interest. The reason for this is that it can lower the interest rate on the rest of the loan. This can give you lower monthly payments. It also can save you money over the life of the loan. Each situation if different, but people usually buy mortgage discount points when they plan to live in a house and stay with the current mortgage for a long time. You typically wouldn't want to pay the up front interest if you are going move soon or if you plan to re-finance the mortgage in the short term.

Mortgage Software and Calculator Pages:

Other Mortgage articles:

           Choosing a Mortgage
           Types of Mortgages
           What are Mortgage Points?
           Refinancing