What Is Mortgage Points?
Mortgage points are optional upfront fees paid at closing to reduce a loan's interest rate — each point typically costs 1% of the loan amount and lowers the rate by a fraction of a percent.
Example
One point on a $400,000 loan costs $4,000. If it lowers the rate from 7.00% to 6.75%, the payment falls from $2,661 to $2,594, about $67 a month, so it takes roughly 60 months to recover the cost.
Go deeper
Recommended calculators
Run Mortgage Points with your own numbers:
More Financing Terms
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
Understand a property's costs and risks before you make an offer
Use the free calculator for your own numbers, or analyze a specific home before you commit.
Or analyze a specific property: Essential Property Analysis, $19 · Property Decision Analysis, $49 · Professional Property Analysis, $99. You choose the depth before you pay.