Although they sound similar to origination fees, discount points are an entirely different financial entity. Discount points are options offered to you before the loan agreement is finalized. The more you buy, the lower the interest rate of the loan becomes. A single discount point almost always costs 1% of the amount you wish to borrow, and will typically reduce the interest rate by 0.25 - 4%, depending on the state of the market. So, let’s say you’re borrowing $500,000 with a 4% interest rate over a 30-year term, and you pay for two discount points rated for a 1% reduction in interest. It will cost you $10,000, but it will bring your interest rate down to 2%. As is the case with origination fees, the parameters of discount points fluctuate from lender to lender, so once again, it really pays to shop around for the best deal. Purchasing discount points is similar to forking out a larger deposit in that both actions bring down your monthly repayments, but discount points are sometimes tax-deductible and bring down the interest rate rather than the borrowed amount. Choosing whether to invest in discount points or simply pay a bigger down payment is one of the most important decisions you’ll make as a borrower. Each has its benefits and drawbacks. My advice is to use loan calculators, amortization tables, and consult a professional to assess which would be the best move for you and your loan.