From what I gathered, loan origination fee is just the fee a lender charges for doing the work. Is that right?
What exactly is discount points and why would someone need to pay it?
Thanks
2007-02-22 14:34:16 · 5 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
A point adds to the costs directly by adding its percentage to the closing costs. Discount points are assessed by subtracting their percentage from the funded part of the loan itself. Loan origination fees can be paid as either points or discount. Heres an example $100,000 loan with 1 point = $100,000 funded loan with a point added to closing fees. $100,000 loan with a 1 point discount = $99,000 funded with borrowed loan amount still set at $100,000 Points are deductable while discount points are not. Never opt for discounts, when buying have seller pay the point and both you and the seller can deduct it. When refinancing, the loan amount is just raised 1% to add in the point. Make sure before agreeing to pay either point or discount that you are actually lowering your interest rate and ask to see the actual par rate. Most lenders negotiate points as away to make you think your buying down a rate. Usually you are merely adding to their profit as the new alledged bought down rate is par for your scenario without any buy down.
2007-02-22 17:45:39 · answer #1 · answered by Kevin H 4 · 2⤊ 0⤋
Origination Fee Vs Points
2016-10-21 11:45:03 · answer #2 · answered by ? 4 · 0⤊ 0⤋
A discount point is a fee paid to get a lower interest rate over a certain perdiod. Generally you are pretty much paying the interest upfront. you are pretty much right about loan origination fee. It is the fee you pay the lender or broker for their services to you. You may not want to shop this as you may find a cheap originator, but you might get less than acceptable service. You re buying the most expensive item you might ever purchase, I wouldn't risk it by looking for the cheapest person to help me.
2007-02-22 14:39:20 · answer #3 · answered by moonman 6 · 0⤊ 0⤋
This is how the lender makes money..
. Discount point buys you a lower interest rate..-(-discount...).for the term of the loan. like.
you can pay
1 point and get 6% or
pay 2 pt and get 5.5%...
2007-02-22 14:56:27 · answer #4 · answered by janetw 2 · 0⤊ 0⤋
Discount points is money to buy down your interest rate. You are right, origination points go to the Lender's pocket.
2007-02-23 01:24:58 · answer #5 · answered by Anonymous · 0⤊ 0⤋
The first two answers are correct except it never hurts for you to shop and get additional quotes.
Lenders vary greatly in their methods and fees.
Good luck.
2007-02-22 15:04:05 · answer #6 · answered by hebb 6 · 0⤊ 0⤋