Discount Points
Discount points are upfront fees paid at closing to permanently reduce your mortgage interest rate. One point equals 1% of the loan amount.
Paying points is essentially prepaying interest in exchange for a lower rate over the life of the loan. The more points you pay, the lower your rate — but the upfront cost increases accordingly.
Discount points are not the same as origination fees, though both may appear on your Loan Estimate. Points are optional and represent a trade-off between upfront cost and long-term savings. They only make financial sense if you plan to keep the loan long enough to recoup the cost. See our guide on how to read your Loan Estimate.
Why This Matters: Buying points can save you thousands over the life of your loan — but only if the math works for your timeline. Ask your loan officer to run a breakeven analysis so you can make a confident decision.
Common question
What is one discount point?
One point equals 1% of the loan amount paid at closing to permanently lower your interest rate. Paying points is prepaying interest in exchange for a lower rate over the life of the loan.
Should I pay discount points?
It depends on how long you plan to keep the loan. Points only make sense if you will stay in the loan long enough to recoup the upfront cost. Ask your loan officer for a breakeven analysis.
Related Topics
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Wondering if buying points makes sense for your loan? We will do the math and show you the breakeven.
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