Discount Points
Prepaid interest a borrower pays at closing to lower the loan's interest rate, where one point equals one percent of the loan amount.
Discount points are an upfront fee a borrower pays to buy down the interest rate on a loan. One point equals one percent of the loan amount. Paying points lowers the interest rate and the monthly payment over the life of the loan.
Discount points differ from origination points, which are a fee the lender charges to process the loan and do not lower the rate.
On the exam
Worked example
2 points on a 300,000 dollar loan is 2 percent, or 6,000 dollars.
Exam trap
Tested in
Financing & Settlement (6% of the exam)
From definition to recall
See this term inside a real exam question.
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This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.