Definition
Upfront fees paid to the lender at closing to reduce your interest rate, where one point equals 1% of the loan amount. It's buying a discount on money you're borrowing—capitalism at its finest.
Example Usage
We paid two points to lower our rate from 7% to 6.5%, which will pay off in roughly 847 years.
Origin
Mortgage lending terminology established in the mid-20th century
Fun Fact
Discount points are tax-deductible in the year paid, assuming you have enough other deductions to bother itemizing.
Source: Mortgage financing terminology
Related Terms
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See “points” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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