What are discount points?

Discount points are optional fees you pay at closing in exchange for a lower interest rate. One point typically equals 1% of the loan amount and often reduces the rate by about 0.25%, though the exact tradeoff varies by lender.

Paying points increases your upfront cost but lowers your monthly payment and total interest over time. The break-even point is how long it takes for the interest savings to equal the cost of the points. If you sell or refinance before then, you may not recoup the cost.

Points can make sense if you plan to keep the loan for many years and want to minimize interest. They are less attractive if you expect to move or refinance in the near term.

When comparing quotes, note whether each offer includes points. A quote with points will show a lower rate but higher closing costs than a no-points quote from the same lender. Enter each option into a comparison view to see the difference.