Discount Points

Definition: Discount points are upfront charges paid in exchange for a lower mortgage interest rate. One point equals 1% of the loan amount.

Example

On a $240,000 loan, 1.5 points cost $3,600: $240,000 × 0.015.

Keep the distinction clear

Use the loan amount, not the property price, to calculate points. One point does not automatically reduce the interest rate by one percentage point; the reduction depends on the lender and loan pricing.

Related terms

Annual Percentage Rate (APR) · Interest · Principal

Keep studying

Discount Points: Borrower Cost and Approximate Lender Yield

References: CFPB: Discount points and lender credits

Pronunciation (US): DIS-kownt POYNTS (capitals show stress)

Pronunciation reference: Merriam-Webster