When you get a mortgage, you’ll be exposed to all kinds of new terminology. In fact, any time you borrow – whether it’s to buy timberland in Lake City, a home for sale in Columbia County, or anything else – you’ll have to familiarize yourself with a few terms.
One of them is the term discount points.
What Are Discount Points on a Home Loan?
Discount points are fees you can pay your lender to lower your interest rate.
Typically, each “point” lowers your interest rate by 0.25 percent. However, point values depend on the term of the loan. In most cases, buying one point will cost you an amount equal to 1 percent of the loan amount.
Here it is in practice:
You’re buying a $100,000 home for sale in Lake City, and you’re financing the full amount. Your lender offers you a 3.5 percent interest rate. You can buy two points and lower your interest rate to 3 percent.
Each point costs $1,000 because that’s 1 percent of the total loan. Each point lowers your interest rate by 0.25 percent, so you need two. You’ll spend $2,000 at closing to get that 3 percent interest rate, which is good for the life of your loan (as long as you have a fixed-rate mortgage). You can learn more about fixed-rate and adjustable-rate mortgages here.
Do You Need to Talk to a Lake City Realtor® About Buying Property?
Whether you’re buying a house, a farm, or a tract of timberland, we can help you find something that’s just right for your needs.
Call us at 386-243-0124 or contact us online. We may be able to help you find the perfect property in Lake City or the surrounding communities.
In the meantime, check out our:
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