Discount Points are fees paid to a mortgage lender that allow the borrower to obtain a lower interest mortgage loan by paying a small upfront premium towards closing costs. Discount points are typically a percentage of the loan amount such as 1.0 points or 2.0 points, which would translate into 1.0% or 2.0% additional payment towards bank fees in closing costs. For a $100,000 home loan, 2.0 points would mean the borrower has to be pay an additional $ 2,000 towards closing costs. Each additional point may allow the borrower to further reduce the interest terms on their mortgage loan, saving the borrower in thousands of dollars in interest over the course of the mortgage terms. Depending on the mortgage lender, a potential borrower can receive several offers for their mortgage loan (e.g., 0.0 points to 2.0+ points).
