Definition
Also called discount points, these are upfront fees (typically 0.5-2% of the loan) you pay to reduce your interest rate. You're buying a lower rate, which saves money monthly.
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1 point = 1% of loan amount. Each point typically reduces rate 0.25%. Seller may pay as concession. Strategic negotiation in offer. Break-even analysis determines value. Holding period affects value. Refinancing risk if planning to sell. Professional guidance supports decision. Tax deductible for owner-occupied. Lower APR with points. Strategic financing decision.
Pro Tip
Request seller pay discount points as a concession. Calculate break-even to determine if points make sense.
Example
2 discount points costing $8,000 reduced interest rate 0.5% saving $100 monthly.
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