Discount points
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Definition
Discount points are optional amounts paid at closing to lower the interest rate on a mortgage. They are a pricing choice, not a synonym for every charge labeled “points.”
In plain English
A lender may offer a lower note rate if the borrower pays discount points at closing. That is a trade between cash now and the rate used later to calculate interest. Origination charges and other “points” can appear on the same disclosure. Those are not automatically discount points.
Technical definition
Fannie Mae’s consumer glossary describes discount points as amounts paid to reduce the rate. This page does not equate all points with discount points.
Why it matters
Closing-cost comparisons need to know whether a charge buys a lower rate or pays for origination.
Related terms
Commonly confused with
Sources reviewed
Glossary of key terms
Source reviewedSeptember 4, 2026
Important note
This page defines discount points only. Other charges labeled “points” can mean something else.
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