Discount points
An upfront fee paid to the lender to reduce the interest rate on the loan. One point costs 1% of the loan amount. Whether it pays off depends on how long you keep the loan.
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See how it worksWhere this comes up: on the market
Part 1 of 4
Why a seller cares
Points are money paid at closing to lower the buyer's rate, and a buyer may ask you to pay them as a concession. It is a closing cost like any other, and it comes out of your proceeds.
Part 2 of 4
A simple example
The buyer asks for a $4,800 seller credit to buy two points on a $240,000 loan, dropping their rate from 6.75% to about 6.25%.
| The ask | What it costs you |
|---|---|
| Two points on $240,000 | $4,800 off your proceeds at closing |
| The same $4,800 as a price cut | The same to you; a smaller loan for them |
| Declining the credit | The buyer pays the points, takes the higher rate, or looks elsewhere |
A point is 1% of the loan. Whoever pays it, the number is fixed at closing.
Part 3 of 4
What people get wrong
That points are a lender fee the seller can ignore. When they are written into the offer as a credit, they are a cost of your sale.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines discount points in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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