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.
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.
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