What is a mortgage discount point?

A mortgage discount point is a fee paid to a lender at closing to reduce the interest rate of a mortgage loan. The cost of a mortgage discount point is equal to 1% of the total loan amount. In North Carolina, discount points are considered prepaid interest and are tax deductible. Discount points are generally seen as additional costs to the borrower, however, they can also be a way to save money in the long run. Paying for mortgage discount points can be beneficial for individuals who plan to keep their mortgage loan for an extended period of time. The reduced interest rate over the life of the loan can ultimately result in a significant amount of savings. On the other hand, those who plan to pay off their loan in a shorter time span may not benefit from paying for mortgage discount points. Mortgage discount points are an important factor to consider when taking out a mortgage loan in North Carolina. It is important to consider the terms of the loan and decide whether the amount of savings that the points will provide outweigh the upfront cost. A mortgage lender can provide more information on how mortgage discount points work and how much they can save over the life of the loan.

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