Points (discount points): Paying discount points will lower your interest rate (as well as your monthly payment) over the life of the loan. When you pay a discount point, you are essentially paying part of your interest to the lender upfront. One discount point is equal to 1% of the loan amount, paid at closing. For example, one point on a $100,000 loan would require an upfront payment of $1,000. Generally speaking, the longer you plan to remain in a property or hold your mortgage, the more advantageous it is to pay points. There is no requirement to pay discount points; whether or not you decide to pay points is completely up to you.