discount point definition

discount point

In the US, one-time fee paid by a home buyer (usually at the time a home mortgage loan is advanced) to compensate the lender for the difference between the market interest rate and the lower rate applicable to home buyers. One discount point is equal to one percent of the principal, and number of discount points charged on the loans varies with the market. Amount paid as discount points is tax deductible, either in installments over the loan period or as a lump sum.

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