Mortgage interest rates are at all-time lows, but that doesn’t mean you should just jump on the first rate you’re offered. One way to get a lower interest rate is to pay discount points. But what are they, and are they worth it?

This guide explains what discount points are, how they work, and whether or not they’re worth it for you.

What Are Discount Points on a Mortgage?

Discount points are a way to lower your interest rate by paying upfront costs. Each point is 1 percent of the loan amount. That means on a $300,000 mortgage, one point would cost $3,000.

Paying discount points can lower your interest rate because you’re essentially prepaying some of the interest. The more points you pay, the lower your interest rate will be.

How Do Discount Points Work?

When you’re taking out a mortgage, the interest rate isn’t just set by the market. There are other factors that affect it as well, like your credit score and down payment.

But one way to get a lower interest rate is to pay discount points. The more points you pay, the lower your interest rate will be.

How Do You Buy Discount Points?

Discount points are paid at closing, and they’re usually paid with cash or from your loan amount.

For example, say you’re taking out a $300,000 mortgage with a 4 percent interest rate. You could buy one point for $3,000 and lower your interest rate to 3.5 percent.

Or you could buy two points for $6,000 and lower your interest rate to 3 percent.

Should You Buy Discount Points?

Discount points are a way to lower your interest rate, but they’re not for everyone.

Before you decide whether or not to buy discount points, you should consider how long you plan on staying in your home. If you’re only planning on staying in your home for a few years, it might not make sense to buy discount points because you won’t save enough in interest to outweigh the upfront costs.

However, if you’re planning on staying in your home for 10 years or more, buying discount points could save you thousands of dollars in interest over the life of your loan.

You should also consider your financial situation. If you have the cash on hand to pay for discount points, it might make sense to do so. But if you’re tight on cash, it might not be worth it to pay the upfront costs.

Ultimately, whether or not to buy discount points is a personal decision. You should weigh the pros and cons and decide what’s best for you.

Discount points are a way to lower your interest rate by paying upfront costs. They’re not for everyone, but if you’re planning on staying in your home for a long time, they could save you thousands of dollars in interest.

$775,000

5 Bedrooms
5 Bathrooms
5,596 Sq Ft
0.890 Acres

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Listing courtesy of Brenda Krempp from RE/MAX Local.

$724,600

3 Bedrooms
4 Bathrooms
4,319 Sq Ft
1.600 Acres

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Listing courtesy of Caroline Gobert from ERA FIRST ADVANTAGE REALTY, INC.

$624,900

3 Bedrooms
2 Bathrooms
2,940 Sq Ft
14.820 Acres

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$624,000

4 Bedrooms
4 Bathrooms
3,906 Sq Ft
0.595 Acres

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Listing courtesy of Annette Wigand from ERA FIRST ADVANTAGE REALTY, INC.

$475,000

4 Bedrooms
4 Bathrooms
3,955 Sq Ft
1.200 Acres

980 W Twentieth St. Jasper, Indiana

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Listing courtesy of Larry Carpenter III from Carpenter Realty LLC.

$425,000

4 Bedrooms
3 Bathrooms
3,610 Sq Ft
1.300 Acres

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$399,000

3 Bedrooms
2 Bathrooms
3,076 Sq Ft
1 Acres

3515 Villa Drive Jasper, Indiana

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Listing courtesy of Leanna Graves from RE/MAX REVOLUTION.

$399,000

3 Bedrooms
3 Bathrooms
2,650 Sq Ft
0.780 Acres

3264 Lakeside Dr. Jasper, Indiana

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Listing courtesy of Larry Carpenter III from Carpenter Realty LLC.

$360,000

4 Bedrooms
2 Bathrooms
3,490 Sq Ft
0.371 Acres

307 Newton Street Jasper, Indiana

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Listing courtesy of Tama Stemle from RE/MAX Local.

$340,000

4 Bedrooms
4 Bathrooms
2,961 Sq Ft
0.294 Acres

333 Daisy Lane Jasper, Indiana

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Listing courtesy of Linda Schroering from CENTURY 21 SCHROERING REALTY.

$325,000

3 Bedrooms
2 Bathrooms
1,650 Sq Ft
0 Acres

614 W 34th Street Jasper, Indiana

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Listing courtesy of Daniel Hoffman from HOFFMAN & MULLEN REALTY INC.

$319,900

5 Bedrooms
3 Bathrooms
2,377 Sq Ft
0.346 Acres

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$315,000

3 Bedrooms
2 Bathrooms
3,232 Sq Ft
0.520 Acres

3508 N 600 W Road Jasper, Indiana

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Listing courtesy of Caroline Gobert from ERA FIRST ADVANTAGE REALTY, INC.

$289,000

3 Bedrooms
2 Bathrooms
1,648 Sq Ft
0.340 Acres

4130 N Portersville Road Jasper, Indiana

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Listing courtesy of Gina Mehringer from F.C. TUCKER EMGE.

$274,900

3 Bedrooms
3 Bathrooms
2,172 Sq Ft
0.460 Acres

1244 W 14th Street Jasper, Indiana

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