Definition: The term "mortgage discount points" refers to a type of financing or mortgage that allows homeowners to pay down their principal balance over time, instead of making monthly payments. In general, a mortgage discount points (MDP) refers to the interest charged on the principal amount when the loan is refinanced with a lower rate. The discount points are typically used in order to increase the interest rate for a fixed-rate mortgage, allowing borrowers to pay off their debt faster. However, it's important to note that MDPs can also result in higher monthly payments by providing lenders with more capital to borrow on. Mortgage discount points (MDP) are often compared to credit card rates or variable-rate mortgages because they provide a lower interest rate and make the home purchase cost more manageable. They're typically offered when a borrower refinances their mortgage to lock in the lower rate, as they believe it will save them money down the road.
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