Discount points
Optional upfront fees paid to lower your interest rate. One point costs 1% of the loan and usually reduces the rate by about 0.25%.
What does discount points mean?
Buying points is prepaying interest to secure a lower rate: one point costs 1% of the loan and typically shaves about 0.25% off the rate. Whether it pays depends on how long you keep the loan — divide the points cost by the monthly saving to find the break-even month. Stay past it and points win; sell or refinance sooner and you have overpaid.
Frequently asked
Are mortgage points worth it?
It depends how long you keep the loan. Divide the points’ cost by the monthly payment saving to find the break-even month; stay past it and points save money, sell or refinance sooner and you have overpaid. They favor buyers who hold the loan for years.
How much does one point lower your rate?
Roughly 0.25% per point, though it varies by lender and market. One point costs 1% of the loan — $3,000 on a $300,000 mortgage — and might drop a 7% rate to about 6.75%.
Put it to use
Mortgage Points Calculator
Decide whether buying discount points to lower your rate pays off, and how long it takes.
Mortgage Calculator
Estimate your monthly principal-and-interest payment and see a full amortization schedule for any home loan.
APR Mortgage Calculator
Convert a rate plus points and fees into the true annual percentage rate (APR) of your mortgage.
Related terms
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