Mortgage discount points

Using points to lower your interest rate.

What are discount points

When you buy discount points, you’re paying part of the interest on your loan up front. This reduces your monthly payment because your lender receives a lump sum at closing and collects less money every month.

How discount points work

Each discount point usually costs 1% of your total loan amount, and lowers the interest rate on your monthly payments. For example, if your mortgage is $300,000 and your interest rate is 3.5%, one point costs $3,000 and lowers your monthly interest to 3.25%. The amount of your interest rate decrease may vary.

When to consider discount points

Consider buying discount points if you plan to stay in your home for a longer period of time, as you'll be making more monthly payments over the long haul. If you plan to move or refinance within the next 2–4 years, paying for discount points may not be ideal.