Points (discount points)
Upfront fees paid to the lender at closing to lower the interest rate. One point equals 1% of the loan amount. Paying points makes sense mainly if you keep the loan long enough to recover the cost.
Also called: discount points, mortgage points, buying down the rate
Related terms
The yearly cost of a loan including the interest rate plus certain fees, such as points and origination charges. It is usually higher than the interest rate and makes it easier to compare offers from different lenders.
The percentage a lender charges to borrow money, used to figure the interest part of each payment. It does not include fees, which is why the APR is often higher.
Paying money upfront to lower a loan's interest rate, either for the full term or temporarily for the first year or two. Sellers and builders often pay for buydowns as a concession.
A fee the lender charges to process and fund a loan, often a percentage of the loan amount. It appears on the Loan Estimate and is included in the APR.
Fees and charges paid at closing on top of the price, such as lender fees, title insurance, recording fees, taxes and prepaid items. Buyers often pay around 2% to 5% of the price; sellers pay their own set of costs.