Real Estate Glossary

What Are Discount Points?

Discount points are fees that are paid by a borrower to a lender in exchange for a lower interest rate on a mortgage. Discount points are also known as "points," and they are expressed as a percentage of the loan amount. For example, one discount point on a $100,000 loan would be equal to $1,000. Borrowers may choose to pay discount points in order to reduce the overall cost of their loan, as a lower interest rate can result in lower monthly payments and a lower total interest paid over the life of the loan.