Discount points

Discount points let you pay money at closing in exchange for a lower interest rate — buying down the rate. One point equals one percent of the loan amount, and each point lowers the rate by an amount the lender sets.

Points are a break-even calculation, not a discount in the everyday sense. You pay more now for a smaller payment later, so the question is how long you keep the loan: stay past the break-even point and the buydown pays off; sell or refinance before it and it usually doesn't.

Points are optional and are disclosed on your Loan Estimate, where they roll into the APR. Whether they make sense is specific to your rate, your cost, and your timeline.