what are mortgage points

Mortgage points, also known as discount points, are fees paid to a lender at closing in exchange for a reduced interest rate on the mortgage. Each point is equal to 1% of the total loan amount. By paying points, borrowers can lower their monthly payments and the overall amount of interest paid over the life of the mortgage. The decision to buy points depends on various factors such as the length of time the borrower plans to own the home and their available cash. Generally, the longer the borrower plans to stay in the home, the more beneficial it is to pay for points. However, it's essential to calculate the "break-even" point to determine if the upfront cost of points is worthwhile based on the interest saved over time