Rates & interest
Discount points
Upfront fees paid to the lender at closing to lower your interest rate, where one point equals 1% of the loan amount and typically cuts the rate by about a quarter percent.
What does discount points mean?
Buying points means paying interest in advance to secure a lower rate for the life of the loan. Each point costs 1% of the loan and usually shaves roughly 0.25% off the rate. Whether it pays comes down to your break-even: divide the point cost by the monthly savings to find how many months until you recoup it. Points make sense if you'll keep the loan well past that break-even; they're wasted money if you sell or refinance sooner. Always compare a with-points and no-points quote side by side.
Common questions
Are discount points worth it?
Only if you keep the loan past the break-even — point cost divided by monthly savings. Stay longer and you profit; sell or refinance sooner and you've overpaid.
How much does one point lower my rate?
Roughly 0.25%, though it varies by lender and market. One point costs 1% of the loan, so on a $250,000 loan that's $2,500 to shave about a quarter percent.
Can I roll points into the loan?
No — points are paid at closing, in cash or via seller/lender credits. That upfront cost is exactly why you weigh them against how long you'll hold the mortgage.
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