what are discount points for mortgages?
Discount points are a type of prepaid interest or fees mortgage borrowers can purchase that lowers the amount of interest they have to pay on subsequent payments. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers the loan's interest rate by one-eighth to one one-quarter of a percent. Discount points are tax deductible only for the year in which they were paid. BREAKING DOWN 'Discount Points' Discount points are also known as mortgage points. They are a one-time, upfront mortgage closing cost which five a mortgage borrower access to discounted mortgage rates as compared to the market.