What are discount and origination points? – Ask the Expert
Written by Diane Phillips
Discount points are points used to buy down the rate, origination points are fees the bank charges for doing your loan.
The normal origination is usually 1%, however, with the low rates lately, lenders are able to charge much less than 1%, and often, are even able to give you a credit toward your closing costs! It all depends on your loan program, loan amount and your credit score and the rate locked at. All of these factors determine the amount of origination you will pay.
If you pay points to buy down your rate, you need to determine how long it will be before you recoup this investment. I am not a big fan of discount points. For example if you pay $ 2,000 to buy down your rate and it makes your payments $ 20 a month less, then it would take you over 8 years to break even with your investment. I feel this $ 2000 in the bank, in case you lose your job, is a much better investment.
Written by Diane Phillips (NMLS # 107944) part of the Diane Phillips/Michelle Cobb team at Homestar Financial Corporation.(NMLS # 70864) Homestar’s corporate headquarters is located in Gainesville, Georgia but Diane and Michelle have a local office and cater to the Mecklenburg/Gaston/Cleveland county areas. Diane is also licensed in SC. They have done several loans for me and my customers love them. She knows and has had experience with about every loan program out there. Diane is an educator and will tell you if she knows of a program that will work better for your situation. I always tell my clients, who have not done so, to be sure to find out your purchasing power before you start looking for that investment. Knowledge is Power and Diane will be glad to get you on the road to making that next purchase. Call Diane at 704 214-3344.
