Paying discount points will lower your interest rate (as well as your monthly payment) over the life of the loan. When you pay a discount point, you are essentially paying part of your interest to the lender up front. One discount point is typically equal to 1% of the loan amount, paid at closing. For example, one point on a $100,000 loan would require an up front payment of $1,000. Generally speaking, the longer you plan to remain in a property or hold your mortgage, the more advantageous it is to pay points. There is no requirement to pay discount points; whether or not you decide to pay points is completely up to you.
Pages on the site that refer to points (discount points)
What are discount points?
purchase
> homebuyer's guide
> step 2
Tax advantages and considerations
purchase
> homebuyer's guide
> step 1
Should I pay points to lower the rate?
purchase
> planning tools & calculators
Should I pay points to lower the rate?
refinance
> planning tools & calculators
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