Mortgage Points (Discount Points)
An upfront fee paid at closing to buy a lower interest rate. One point equals 1% of the loan amount.
Last updated: October 3, 2026Points let you prepay some interest to get a lower rate. One point is 1% of the loan amount, and points don’t have to be round: 0.5 or 1.375 points are normal. They’re paid at closing and show up on page 2, Section A of your Loan Estimate and Closing Disclosure. By law, points listed there must be tied to a discounted rate. How much each point actually buys depends on the lender, the loan type and the market that week, so there’s no fixed exchange rate. Lender credits are the same trade in reverse: a higher rate in exchange for cash toward closing costs.
The question is always whether you’ll keep the loan long enough for the monthly savings to repay the upfront cost. If you might sell or refinance in a few years, points are often money left on the table. In NYC that cash also competes with everything else due at closing: mortgage recording tax on a condo, and the post-closing reserves co-op boards commonly want to see. Money spent on points is money that no longer counts toward post-closing liquidity.
Taxes, briefly: points are prepaid interest, so they’re generally deductible over the life of the loan. You can generally deduct them in full in the year paid if you meet the IRS tests, which include the loan being secured by and used to buy your main home. Points on a refinance or a second home generally are not fully deductible up front. Ask a tax professional about your own situation.
Worked example
On a $600,000, 30-year loan at this site’s default 6.95% rate, principal and interest is about $3,971.69 a month. One point costs $600,000 × 1% = $6,000 at closing. Suppose, hypothetically, that point lowers the rate to 6.70% (a made-up figure for illustration, not a market quote). The payment drops to about $3,871.67, saving roughly $100.02 a month. Break-even is $6,000 ÷ $100.02 ≈ 60 months, about five years. Keep the loan longer and the point pays off; sell or refinance sooner and it doesn’t.
To see how much a rate change moves your maximum price, try the Rate Sensitivity tool, or read how mortgage rates affect NYC affordability.