A mortgage discount refers to the difference between the total amount of the mortgage loan and the actual sale price of that mortgage. This term is commonly used in real estate transactions, where it can also describe upfront fees charged by lenders at closing to cover financing costs. Typically, the buyer pays the mortgage discount, although in some cases, the law may require the seller to cover this expense.
The term "mortgage discount" is primarily used in real estate law and finance. It plays a significant role in transactions involving mortgages, where understanding the financial implications can influence the buyer's decision. Users can often manage aspects of mortgage discounts through legal forms and templates available on platforms like US Legal Forms, which provide guidance on how to navigate these transactions.
Here are a couple of examples of abatement:
Example 1: A buyer secures a mortgage for $250,000 but the lender sells the mortgage for $240,000. The mortgage discount in this case is $10,000.
Example 2: During closing, a lender charges $3,000 as an upfront mortgage discount fee, which the buyer pays to cover financing costs. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Mortgage Discount Practices |
|---|---|
| California | Commonly requires disclosure of mortgage discounts in loan agreements. |
| Texas | May have specific regulations regarding upfront charges and discounts. |
| Florida | Typically allows buyers to negotiate who pays the mortgage discount. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Mortgage Rate | The interest rate charged on a mortgage loan. | Mortgage discount relates to the sale price difference, while mortgage rate refers to interest costs. |
| Loan Origination Fee | A fee charged by lenders for processing a new loan. | Loan origination fees are separate from the mortgage discount, which specifically pertains to sale price differences. |
If you are involved in a real estate transaction and encounter a mortgage discount, consider the following steps:
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A mortgage discount is the difference between the mortgage principal and the sale price of the mortgage, often involving upfront charges at closing.