Today I want to talk to you a little bit about loan discount points. A loan discount point in mortgages is going to be roughly 1% of the amount that you borrow. For example, with a $500,000 mortgage, one discount point is going to equal $5,000. Now, that can be paid by you, it could be paid by the seller, it could be paid by the real estate agent, or really anyone involved. It could be a combination of all of you that make up that amount. And then, once we have the money in place, what we do is permanently buy down the interest rate. So, if you have an interest rate of 7% without buying down the rate, you can potentially, with one discount point, pay it down to around 6 3/4, 6 5/8, and then you can pay multiple points and, and buy it down even further.
What that does is save you significant interest over time, over the life of the loan. Because remember, you’re buying down that interest rate for the full term of the mortgage. So, a 15-year fixed, you’d buy it down for the full 15 years, a 30-year fixed, the full 30 years. So, you always want to consult with our team and make sure that this is the right strategy for you. What we do is we run some numbers on how long it’s going to take to recoup the money being paid to buy down the rate and make sure that it aligns with your goals, with how long you’re going to be in the house.