Costs
Points (Discount Points)
An upfront fee paid to the lender at closing to lower your mortgage interest rate, where one point equals 1% of the loan amount. On a $300,000 loan, one point costs $3,000 and typically reduces your rate by about 0.25%. Buying points makes sense if you plan to keep the loan long enough to recoup the upfront cost through lower monthly payments — usually five to seven years. Your Loan Estimate will show the cost and rate impact of any points.
Why It Matters
Knowing about Points (Discount Points) helps you budget accurately for your home purchase. Many first-time buyers are surprised by costs beyond the purchase price, and understanding each component prevents unwelcome surprises at the closing table.
When planning your homebuying budget, factor in points (discount points) early in the process. Ask your lender or real estate agent for estimates specific to your situation and location, since these costs can vary significantly.