What is Discount Points?
Discount points are upfront fees paid at closing to permanently reduce the interest rate on a mortgage loan.
Discount points are optional fees that lower your interest rate, with one point typically costing one percent of the loan amount. Borrowers meet them when they want a lower monthly payment and plan to keep the loan long enough to recoup the upfront cost. Watch for the break-even period, which is how long it takes for monthly savings to exceed the points paid. Points may be tax-deductible in some cases. Compare the cost of points with the benefit of a lower rate.
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