Discount Points from Unit 12: Residential Mortgages

Discount Points from Unit 12: Residential Mortgages

Discount Points have both a monetary value and a percentage value.  The monetary value is the upfront cost of the point which equates to 1% of the total mortgage amount.  The upfront value is paid by the borrower to buy down the interest rate of the mortgage.  The percentage value of a discount point is the increased percentage yield to the overall effective yield of the interest rate.  The percentage value of the discount point is 1/8 of 1% or .125 added to the interest rate. 

Back to blog