Discount Points
Discount points are upfront fees you pay a lender to lower your mortgage interest rate — one point costs 1% of the loan and typically cuts the rate by about 0.25%. Buying points makes sense only if you'll keep the loan long enough for the monthly savings to recover the upfront cost.
One point costs 1% of the loan and typically buys about a quarter-point off the rate, though the exchange varies by lender and is negotiable. The decision is a break-even: divide the cost of the points by the monthly saving they produce. Paying $6,000 to save $90 a month breaks even at 67 months, so points pay only if you keep the loan well beyond five and a half years — and most borrowers sell or refinance sooner than they expect. This is also the flaw in comparing mortgages on APR alone, since APR spreads the points across the full term and therefore flatters a loan you will not hold that long. Points may be tax-deductible if you itemize.
Put it to work
APR Calculator
See a loan's true cost. Enter the rate, term, and upfront fees to get the real APR — the number that folds points and closing costs into one annual figure you can compare across offers.
Mortgage Calculator
Estimate your monthly mortgage payment with taxes, insurance, PMI and HOA — plus total interest and a full amortization breakdown. Free, fast, no signup.
Mortgage Refinance Calculator
Should you refinance? Compare payments, find your break-even month on closing costs, and see the honest lifetime cost — including the term-reset trap.