The full explanation
The opposite is lender credits: the bank lowers your closing costs today in exchange for a higher rate. Buying points only pays off if you keep the loan long enough for the monthly savings to exceed what you paid. Points appear on the Loan Estimate, in section A of the closing costs.
An example
Elena plans to live in her home for many years, so she pays points at closing to lower her rate. Her cousin, who expects to move soon, prefers not to pay them.
With real numbers
Computed with official data for the whole U.S. In your county the numbers may differ.
- Example loan
- $266,160
- One point (1% of the loan)
- $2,662
One discount point costs 1% of the loan. On a $266,160 loan (a $332,700 home with 20% down), each point costs $2,662, which you pay at closing in exchange for a lower rate.
Computed with: American Community Survey (ACS) 5-year estimates (2020–2024) · CFPB — How should I use lender credits and points (also called discount points)? (October 17, 2026) · Fannie Mae Selling Guide B7-1-01 — Provision of Mortgage Insurance (October 17, 2026)
You will see it in…
- The Loan Estimate, page 2, section A (“Points”)
- The Closing Disclosure, under loan costs
- Bank rate offers (“with points” or “no points”)
