1 percentage of the total loan amount-discount point
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berkley
Apprentice
Joined: 07 Mar 2008
Posts: 3
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 Posted: 09/02/08 - 08:42 Post subject: |
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| Can somebody explain me what is a discount point? I have heard that it is actually 1 percentage of the total loan amount, but I do not quite understand what they are used for. Can somebody please explain me what exactly they are and what their purpose is. I am looking forward to hear your explanation. Thanks in advance |
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chaunce
Apprentice
Joined: 07 Sep 2007
Posts: 1
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| Posted: 09/17/08 - 05:22 Post subject: |
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| Yes, you have heard it right. Every point is actually 1 percent of total loan amount, so it is very easy to calculate it. And every point you buy in advance will reduce the interest rate you are going to pay, for some 0, 25 percent of the price. So, for two discount points you will get 0,5 % less, which is on the long run a very smart choice. It is the best to take to some bank officer and ask him to explain it to you better. |
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ruperta
Apprentice
Joined: 18 Nov 2007
Posts: 1
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| Posted: 10/02/08 - 02:02 Post subject: |
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| Of course, you have to be aware that this is a good choice only if you plan to stay in the house forever, or to stay longer there. Otherwise, you can even waste some money…You just need to make a good calculation. But, first thing first – do not even think about it if there is a chance you will be using this asset you are buying for just couple of years. Discount points are very useful both for borrower and the lender, and that is why they are very common. |
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