Point (mortgage)

Discounts, Rebates, or a discount is in finance a discount from face value, can be agreed at a lending or the issue of a security or of varieties.

The opposite of the discount is the discount or premium.

Securities and varieties

For bonds, it is market practice that issuers either demand or a discount, so one issue discount deducted, an initial charge (premium). Both lead during the investment period to a decrease in return either the issuer ( discount) or the investor (premium). Shares and Shares in limited, however, may § 3 Sentence 3 Limited Liability Companies Act will not be issued at a discount AktG § 9 and § 5.

In foreign cash (varieties ) at the banks below the official exchange rate ( discount) or sell above the exchange rate ( premium). In contrast to the central banks, the varieties the official exchange rate to buy and sell carried on the buying and selling of credit institutions a discount or premium on the official exchange rate, which is due to the procurement, administrative and insurance costs. This fee is usually between 2-4 % of the nominal value of the varieties. Usually speaking, however, the discount from the bid price and the ask price of the premium.

Loan

The discount is either a percentage of the loan amount, including discounts, for example, " 9% discount " or as a payout or payout ratio, eg " 91 % payout ratio ", ie 100 euros loan amount in both cases, only 91 euro loan amount paid that are provided to the borrower. But he has to pay interest and repay a total of 100 euros.

Reason of a discount with a credit agreement of a lower nominal interest rate, because the discount is considered to be prepaid interest. This is the monthly installment payment - during the period for which the discount was paid for in advance - kept low. Because of the undisbursed discounts but take a higher loan amount for a given borrowing requirement to pay interest and repay than a loan without discount.

The relatively complicated calculation of the payable due to the discount " discount " nominal interest rate is only possible with an elaborate iteration procedure, which ( loan) is defined exactly in the price regulation. The financialmathematically not trained customer can not verify these calculations usually. The PAngV aims her effective interest calculation from the fact that two credit variants are comparable with each other, if the resulting according to a uniform calculation method effective annual interest rate for the same residual debt at the end of the comparative period has been determined.

The prescribed in the PAngV method is based on the assumption that the entire loan amount including discount will be completely paid off at the beginning of the loan term and the loan is already repaid a month after disbursement. This is in mortgage loans that are granted for the construction of a house, practically not the case - as opposed to the purchase of land, buildings finished or rescheduling.

Legal bases

In the context of freedom of contract, the parties to a credit agreement can also use the option pricing and differentiation. A leading to the reduction in nominal interest rates discount heard civilly to the interest, as it has evolved in the banking practice to a calculation factor for the interest calculation. The agreed discount is viewed by the courts as a term-based compensation for a lower nominal interest rate. The interpretation of the contract shows that the discount is to be regarded as an integral part of the interest calculation.

Decisive is not selected in the loan agreement term "interest " or as a "cost ", but the distinction between on the one hand maturity-related interest and on the other hand all other independent term borrowing costs. Whether charges are classified as term-dependent interest or as a term -independent costs, is to be determined in each case by way of interpretation. From § 492 paragraph 2 BGB be designated not only in the contract as interest, but also includes other interest-related payments, if they have maturity-dependent character. This has been expressly decided in the case of the Supreme Court agreed discounts. This also applies to a handling fee, even if it is configured as a term-dependent compensation with interest- related character. Also, the BFH the discount for tax purposes from the definition of interest under civil law.

Discount for early repayment

Whether banks are obliged to refund the pro rata unused discounts, crucially depends, for some reason the credit agreement has been terminated prematurely.

• If the agreement ends because the borrower of a right of termination pursuant to § 286 para about 3 BGB or § 489 BGB makes use or assume both parties agree on an effective termination by the borrower, the legal basis for the unused discount has been dropped. Then the borrower is an enrichment claim under § 812 para 1 BGB to a refund of the prorated discount. Such cases had been held on several occasions the Supreme Court. The banks concerned were sentenced here to refund the pro rata unused discount.

• When a loan contract is terminated prematurely with a fixed term by dismissal of the lending bank for good cause, because the borrower to fulfill its obligations culpably failed to comply, the bank is entitled to a claim for compensation for the damage they suffered due to the early termination of the contract ( § 249 BGB). In the calculation of the damage the unused discount is a dependent accounting items. Since the due and forfeit in payment of the loan discount without the dismissal would have been completely consumed, the prorated discount must in principle remain as part of the legally protected interest rate expectations the bank in full. An exception come from the point to favorable, however in the - not very frequent - cases considered, in which the bank prematurely repaid the loan at an effective contractual interest rate in excess can create because of the higher interest rates again.

Tax issues

General treatment

According to § 250 paragraph 3 HGB, reporting companies at discount may be capitalized when a difference between redemption and issue price of a debt or loan is made. A discount for tax purposes in Germany according to § 5 paragraph 5, sentence 1 No. 1 German Income Tax Act to be treated as cost of money in the tax balance principle as prepaid expenses, provided that the term of the loan on the balance sheet date exceeds ( capitalized ). The accounting option can be exercised regardless of the tax status of duty. The resolution recognized proportionately over the entire duration of the underlying loan, while the interest scale method or the straight-line method is applied.

Real estate loans

The agreement of discounts in credit agreements is only useful if you can make the amount of the discount in the year of payment and upon fulfillment of the (tax) environment tax deductible as a business expense; this is in real estate loans since 1996 no longer for owner-occupied, but only when leased to third parties or used for operations peculiar property of the case. The tax benefit is in these cases, but only the initial nature and only foreseeable progressive taxation differences, because although initially taxes are saved by the purchased interest rate advantage in the future to pay more taxes but because of the lower ( deductible ) interest payments. Since 1 January 2006 this rule is changed or been exposed to 31 December 2005 and up to a statutory clarification.

In the current version of § 11 paragraph 2 sentence 3 German Income Tax Act, it is clarified that the financing of foreign properties used by a market- discount in the netting is deductible in full; market practice is for example a discount of 5% for a commit duration of 5 years.

Numismatics

The discount represents the discount to the face value of a coin when it is compared to their fine weight, overstated.

Premium on credit cards

The term discount is also found in the credit card sector. The agreed upon in the enforcement relationship between the card issuer and contracting companies in the use of credit cards service fee (between 2 % and 5%) will be deducted from the card sales will be retained by the card issuer and is also called discount.