Each discount point is equivalent to what percentage of the total loan amount?

Each discount point is equivalent to 1% of the total loan amount. Discount points are fees paid upfront to lower the interest rate on a mortgage loan. When a borrower pays points, they essentially prepay interest on that loan, which can result in lower monthly payments.

For example, if you are taking out a mortgage for $200,000 and you decide to pay two discount points, that would equal 2% of the total amount, or $4,000. By paying those points, you would secure a lower interest rate, leading to a reduction in your overall loan cost over time.

This concept is essential in real estate financing, as understanding how discount points work can help consumers make informed choices about their mortgage options and potentially save money over the life of the loan.