What are mortgage points or discount points?

A point equals one percent of the loan and is usually paid at closing.

For example, if your loan amount is $100,000, then one point would equal $1,000 OR one percent. Discount Points are fees paid by the buyer to the lender in order to reduce the loan’s interest rate. If you plan to keep your residence for five or more years, it may be worthwhile to pay discount points up front to reduce your monthly payment and achieve greater interest savings over the life of the mortgage.

In most cases, points are tax deductible when applied to the purchase of a primary residence. Consult your tax advisor for more information on tax deductibility.