What is a Discount Point?
Mortgage rates may be dropping, but mortgage costs are not.
According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.
A “discount point” is prepaid mortgage interest. Basically, an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.
Even though they may be tax-deductible rising costs are rising costs and Freddie Mac glosses over it. In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn’t do the same for required points.
The press fails to mention discount points entirely.
An increase of 1/10 percent in discount points costs homebuyers and refinancing households in Urbandale an extra $100 per $100,000 borrowed.
The hike reminds us that there’s more to a mortgage than just its rate — costs matter, too. And if you’ve only been watching the headlines, you would have missed how costs are rising.
If you’re wondering how the headlines are impacting you specifically, send me a message. I’d be happy to help you out and provide a free rate quote!
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