Definition
Fees paid at closing to reduce the mortgage interest rate, each point equal to 1% of the loan amount.
Example
Paying 1.25 points cost $5,000 and lowered the rate by 0.375%, breaking even in 41 months.
Related terms
- Acceleration Clause
- Accrued Interest
- Adjustable Rate Cap
- Adjustable-Rate Mortgage
- Amortization
- Annual Percentage Rate
Frequently asked questions
What does Discount Points mean in real estate?
Fees paid at closing to reduce the mortgage interest rate, each point equal to 1% of the loan amount.
How is Discount Points used in practice?
Paying 1.25 points cost $5,000 and lowered the rate by 0.375%, breaking even in 41 months.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.