Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. Each point is equal to 1% of your mortgage loan (or $1,000 for every $100,000). Essentially, paying points requires more funds at the time of closing but will result in lower monthly payments over the term of your loan.