What are mortgage points?

Will, the short answer to your last question, the one nobody above touched: lenders offer points because points let them advertise a lower rate than they can actually deliver at par. You pay the difference. The six answers above handle discount points and break-even correctly. Three things are missing, and the third is your question. First, two different products are sold under the word buydown. A permanent buydown is what people mean by discount points. You pay cash at closing and the note rate drops for the life of the loan. Roughly one point (one percent of the loan) buys near a quarter point of rate. A temporary buydown is a different animal. In a 2-1, your rate sits two points below the note rate in year one and one point below in year two, then steps up to the note rate in year three. A 3-2-1 does the same over three years. Your note rate never changed. Money sits in an escrow account and is released monthly to cover the difference. The critical detail: you qualify on the note rate, not the teaser rate, so you must afford the year three payment on day one. The funding almost always comes from a seller or builder concession, which is why builders love them right now. Second, the tax treatment, which changes the real cost. Under IRS Publication 936, points paid to buy or build your main home are generally deductible in full in the year you pay them, if conditions are met: paying points is established practice in your area, the amount is computed as a percentage of the loan and shown on your settlement statement, and the cash you brought to closing at least equals the points. Refinances are different. Points paid to refinance generally cannot be deducted all at once. You spread them over the loan's life, so points on a 30-year refinance come off in 360 slices. Pay it off early and the unamortized remainder generally becomes deductible in the payoff year, with an exception if you refinance with the same lender. That changes your break-even. Points on a purchase are cheaper after tax than the sticker suggests, if you itemize. Points on a refinance are not. Third, your actual question: why does a lender offer points? Because rate and cost are one dial, not two. Every lender publishes a rate sheet with a price attached to each rate: below a certain rate you pay the lender, above it the lender pays you. Points are the paying end. They let a lender advertise 6.25 percent when the honest par rate that day is nearer the 6.69 percent the Freddie Mac survey showed for the week of August 6, 2026, the difference buried in "plus 1.5 points." The mirror image is the lender credit, the more useful half for most buyers. You accept a rate above par and the lender writes a check toward your closing costs. If you are short on cash, or expect to be gone within four years, that is often the better trade. Do this. Ask every lender for the same loan quoted three ways on a Loan Estimate: at par with zero points, with one point paid, and with a lender credit. Same amount, same day, same lock. Side by side, the tradeoff becomes arithmetic you can check. One 2026 note. You asked in early 2024, when the 30-year averaged 6.94 percent. Rates have eased since, so rerun any break-even math on a current quote. I am a real estate professional, not a lender and not a tax advisor, so confirm the specifics with a CPA and a licensed loan officer. I am Zoltan Peresztegi and I work in Los Angeles, the South Bay and the Palos Verdes Peninsula, so New Hampshire is outside my territory. I would be glad to connect you with a strong Concord area agent from my network. Zoltan

Mortgage points, also called **discount points**, are optional upfront fees you pay at closing to reduce your mortgage interest rate. Generally, **one point costs 1% of the loan amount**. For example, on a $400,000 loan, one point would cost $4,000. The main benefit is a lower monthly payment and less interest paid over the life of the loan. The drawback is the higher upfront cost. Buying points usually makes the most sense if you plan to stay in the home long enough to recover that cost through your monthly savings. Not every lender offers the same point options because loan programs and pricing vary by lender. That's why it's important to compare offers from multiple lenders and ask them to show you the "break-even point"—how long it will take for the monthly savings to offset the cost of the points. **Juan Picos** REALTOR® | JohnHart Real Estate Serving Burbank, Glendale & Greater Los Angeles

Mortgage points can feel a little confusing at first, but the idea is actually pretty simple once you see how they affect the life of a loan. When you buy a home, you usually focus on the interest rate and monthly payment. Mortgage points are basically a way to “prepay” some of the interest upfront in exchange for a lower interest rate over time. A good place to explore examples and payment scenarios is Mortgage Calculator US. There are two common types of mortgage points: Discount points – these lower your interest rate. Origination points – these are lender fees for processing the loan. Most people are talking about discount points when they ask whether points are “worth it.” Typically, 1 mortgage point costs 1% of the loan amount. So if you borrow $300,000, one point would cost $3,000 upfront. In return, the lender reduces your interest rate slightly. The exact reduction varies, but it might lower the rate by around 0.25%. Here’s where the real decision comes in: If you plan to stay in the home for a long time, points can save you money because your monthly payment stays lower for years. If you expect to move, refinance, or sell relatively soon, you may never recover the upfront cost. That’s why people often calculate a “break-even point.” For example: You pay $3,000 for points. Your payment drops by $75 per month. It would take about 40 months to recover the upfront cost. If you stay beyond that, the savings start working in your favor. The benefits of mortgage points are pretty clear: Lower monthly payments Less total interest paid over the life of the loan Potential tax advantages in some situations But there are drawbacks too: Higher upfront closing costs Reduced cash available for moving expenses, repairs, or emergencies The savings disappear if you refinance or move too early A lot of first-time buyers realize later that keeping extra cash on hand would have helped more than shaving a small amount off the payment. As for why one lender offers points and another doesn’t — that usually comes down to business strategy and loan structure. Some lenders prefer simpler pricing with fewer customization options. Others compete by giving borrowers flexibility to “buy down” the rate. In some cases, lenders may technically offer points but not advertise them heavily because many buyers focus more on minimizing upfront costs. You’ll also sometimes see the opposite approach: negative points or lender credits, where the lender gives you a slightly higher interest rate in exchange for helping cover closing costs. In practice, mortgage points are really just part of the negotiation between: how much cash you want to spend today, how low you want your payment, and how long you expect to keep the mortgage. That’s why two buyers looking at the exact same loan might make completely different choices. https://mortgagecalculatorus.net/

Mortgage points, or discount points, are fees paid directly to the lender at closing in exchange for a lower interest rate, essentially prepaying interest to reduce monthly payments. One point typically costs 1% of the total loan amount. Good luck on your purchase. Keith Jean-Pierre Managing Principal The Dapper Agents Operations In: NY, NJ, FL & CA

Mortgage points are basically prepaid interest. You pay upfront at closing to “buy down” your interest rate. One point usually equals 1% of the loan amount and lowers your rate by about 0.25%, though it varies. Benefits: If you plan to stay in the home long term, points can save you a lot in interest over time. Drawbacks: They cost cash up front, so if you sell or refinance too soon, you may not break even. Some lenders push points as a way to make monthly payments look more affordable, while others may not offer them depending on their pricing structure or how competitive they want to be.

A point is 1% of your mortgage amount. Think of it as interest that you pay up front. Lenders charge points if you have a lower credit score and also to buy down your interest rate.

Mortgage points, also known as discount points, are a form of prepaid interest. You can choose to pay a percentage of the interest up front to lower your interest rate and monthly payment. A mortgage point is equal to 1 percent of your total loan amount. For example, on a $100,000 loan, one point would be $1,000.