Mortgage Confidential: Paying points


Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

Discount Points, or simply "points," is another of the slough of terms rarely heard outside the home loan process. Do you think lenders just make up all those foreign terms to try and confuse us? Possibly. Even so, this particular term deserves some attention because it affects what your monthly payments will be on your new mortgage.

A point represents 1% of your loan amount. For a loan amount of $250,000 one point would equal $2,500. A point is sometimes called a discount point because the point is used to discount your interest rate that you use to calculate your mortgage payment. How much does it discount your rate?