Points (Mortgage Points)

Definition

Prepaid interest charges (1 point = 1% of loan amount) used to buy down mortgage rates. The lender's way of letting you pay extra now to pay less later.

Example Usage

We paid 2 points ($6,000) to reduce our interest rate from 4.5% to 4.0%.

Origin

Financial industry terminology from mortgage lending practices

Fun Fact

The break-even point on buying down your rate is typically 5-10 years—if you're keeping the house longer, points usually make financial sense

Source: Mortgage industry standards and disclosure requirements

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