What is one discount point equivalent to when purchasing a mortgage?

One discount point is equivalent to 1% of the loan amount when purchasing a mortgage. This concept is crucial in real estate financing as discount points are fees paid upfront to the lender at closing in exchange for a lower interest rate on the mortgage. Essentially, each point you purchase decreases the interest rate on the loan, which can lead to significant savings in monthly payments and over the life of the loan.

When borrowers are considering mortgage options, understanding discount points can help them make informed decisions based on their financial situation and long-term goals. The ability to lower the interest rate through buying discount points can be particularly advantageous in a low-interest-rate environment, where borrowers might want to secure the lowest possible rate for the duration of their loan.