Lenders calculate points as a percentage of the loan amount. One point equals 1% of the loan amount.
As a rule of thumb, one point reduces the interest rate by a quarter of a percent. For a $100,000, 30-year fixed rate mortgage, 1 point costs $1,000, reduces the rate by 0.25%, and lowers the monthly payment by $15.
In practice, however, the exact number of points you'll pay to reduce the rate fluctuates because mortgage rates change continuously. So ask the lender for a rate quote for the actual cost. Or, check our mortgage calculator for instant and accurate interest rates and closing costs.