# Discount points

> Discount points are fees paid to the lender at closing to lower your mortgage rate. What one point costs, where it appears and how to find the break-even.

URL: https://mortgage-math-us.com/glossary/discount-points/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**Discount points** are an upfront fee you pay the lender at closing in exchange for a lower interest rate than you’d get with a zero-point loan. One point costs 1% of the loan amount, and points are listed in section A on page 2 of the Loan Estimate and Closing Disclosure.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Cost of one point, share of the loan amount | 1% | [CFPB](https://www.consumerfinance.gov/ask-cfpb/how-should-i-use-lender-credits-and-points-also-called-discount-points-en-136/) | Oct 19, 2023 |
| 30-year fixed average (used in the example) | 7.24% | [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) | Week of Oct 29, 2026 |

## Finding the break-even

How much a point lowers the rate varies by lender, loan type and market, so this is only an illustration. On a $300,000 30-year loan at 7.24%, principal and interest is $2,044 a month. If one point ($3,000) cut the rate by 0.25 percentage point to 6.99%, the payment would drop to $1,994, saving $51 a month. You’d need about 60 months, roughly 5.0 years, to earn the cost back. Sell or refinance sooner and the point loses money. The CFPB suggests asking for quotes with and without points and comparing them over the shortest, longest and likeliest time you’ll keep the loan.

## Points and your taxes

Points are prepaid interest. IRS Publication 936 lets you deduct points on a loan to buy your main home in the year paid if a list of tests is met; otherwise they’re deducted over the life of the loan. Only borrowers who itemize benefit.

## Related terms

- [Lender credit](https://mortgage-math-us.com/glossary/lender-credit/), the same trade in reverse
- [Origination fee](https://mortgage-math-us.com/glossary/origination-fee/) and [APR](https://mortgage-math-us.com/glossary/apr/)
- [Break-even point](https://mortgage-math-us.com/glossary/break-even-point/), and the [mortgage points guide](https://mortgage-math-us.com/buying/mortgage-points/)

## Sources

- [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- [CFPB](https://www.consumerfinance.gov/ask-cfpb/how-should-i-use-lender-credits-and-points-also-called-discount-points-en-136/) — Cost of one discount point (share of loan amount) (Oct 19, 2023)
- [IRS Publication 936: Home Mortgage Interest Deduction](https://www.irs.gov/publications/p936)

_General information, not financial advice._