Mortgage discount points are essentially a pre-payment on interest on your mortgage, and one point is equal to one percent of the mortgage amount. In other words, on a $200,000 loan, 1 point mortgage point would cost you $2,000 at closing. In turn, you knock down your interest rate for the life of the loan.

Mortgage discount points are different from origination points, which are essentially fees charged to simply get the mortgage.

Discount points don’t have to be round numbers: You can pay 1.375 points, 0.5 points or 0.125 points, according to the Consumer Financial Protection Bureau. The points are paid at closing and impact your closing cost