Loan Origination and Discount Points - Utah Home Loans

By: Robert A. Hulme - Realtor - Loan Officer -

Utah County, Including Provo, Orem, Pleasant Grove, American Fork, Lehi, Highland, Alpine and Cedar Hills

Origination points are a fee paid to the originating lender which is part of the profit margin for the services that they provide.  Both are measured as a percentage of the loan amount and both are factored into the loans APR.  Generally, points are deductible as long as the seller didn't pay for them and origination fees are tax deductible provided they are expressed as a percentage.

Discount points enable you to lower your loans interest rate.  They are basically prepaid interest, with each point equaling 1 % of the total loan amount.  When you pay a point on a 30 year mortgage, you can lower your interest rate by .125 of a percentage point.  When comparing loan rates, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid.  Discount points are a good idea if you plan to stay in your home for some time since they will lower your monthly loan payment.  Points are tax deductible when purchasing a home and sometimes you can negotiate with the seller to pay for some of them.