The discount you‘ll receive depends on your lender and the current state of the mortgage market. In all cases, however, discount fees are expressed as points — or fractions thereof. For example, your lender may quote you a rate with one point, another rate with 1 points and a third rate with two points.
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Discount points are a way of pre-paying interest on a mortgage. How Much Do They Cost? Points cost 1% of the balance of the loan. If a borrower buys 2 points on a $200,000 home loan then the cost of points will be 2% of $200,000, or $4,000.
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Discount points are pre-paid interest on a loan. For each discount point you the mortgage rate will be reduced by up to a quarter of a percent. The amount of rate reduction per discount point varies between lenders and market conditions. Because you are paying less interest, your monthly mortgage payments will be lower as well.
Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called "buying down the rate," which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000).
An amount paid to the lender, typically at closing, in order to lower the interest rate. Also known as mortgage points or discount points. One point equals one percent of the loan amount (for example, 2 points on a $100,000 mortgage would equal $2,000).
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Discount fees on mortgages may or may not be beneficial to the borrower. Sometimes discount fees mean more income for the lender, but they can also mean a lower interest rate for the borrower.