Discount Points
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
Discount points are upfront fees paid to the lender to permanently lower your mortgage interest rate, with one point costing 1% of the loan amount.
What Discount Points means
Each point typically buys roughly a 0.25% rate reduction. Whether points pay off depends on how long you keep the loan, since you recover the cost through lower payments over time.
Florida example
On a $400,000 Florida loan, one point costs $4,000 and might drop the rate from 6.75% to 6.5%, saving about $65 a month. The break-even is around five years, so points suit long-term owners.
Buying a lower rate
Discount points are an upfront fee you pay to lower your interest rate. One point costs 1% of your loan and usually drops your rate by about a quarter percent.
On a $300,000 loan, one point costs $3,000 and shaves your rate for the life of the loan.
When points pay off
Points make sense when you keep the loan long enough to recoup the cost through the lower payment. That break-even is often five to seven years.
We calculate your break-even before you decide. Reach out and we will show whether buying points saves you money.
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