Which fee is associated with lowering a mortgage interest rate?

The fee associated with lowering a mortgage interest rate is known as Discount Points. When a borrower pays discount points, they are essentially pre-paying interest on the loan to secure a lower interest rate. Each point typically costs 1% of the total loan amount and generally lowers the interest rate by an agreed-upon percentage, often around 0.25%. This can result in significant savings over the life of the loan, making it a strategic choice for borrowers who plan to stay in their homes long-term.

Other fees such as processing fees, underwriting fees, and application fees serve different purposes in the mortgage lending process. Processing fees cover the administrative costs of handling the loan application, while underwriting fees are associated with the evaluation of the borrower's creditworthiness and risk assessment for loan approval. Application fees are charged for the initial processing of the loan request. None of these fees are directly tied to reducing the mortgage interest rate, which is why discount points stands out as the answer to this question.