What are discount points?
Discount points are an optional upfront fee paid at closing in exchange for a lower mortgage interest rate. One point equals 1% of the loan amount. Each point typically reduces the interest rate by about 0.25%, though this varies by program and market.
Whether points make sense depends on how long you plan to stay in the home. A ‘break-even’ analysis — how many months the rate savings take to recoup the points paid — is the right framework.
APR · closing costs · interest rate
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