I don't understand mortgage points. Do I have to pay them?
There are two types of points: Discount points and origination points, or fees.
Discount points
Discount points are optional and allow borrowers to pay a sum upfront to lower the interest rate of a loan. One point equals 1 percent of the loan amount. For a $200,000 home, a point would cost $2,000; 2 points would cost $4000 and so on.
Borrowers can choose to pay zero, one, or multiple points based on their financial strategy.
Whether you want to pay points depends on your situation.
Note that if you know you will be staying in the house for only a few years, taking the higher interest rate would be to your advantage. The break-even time would be about five years.
If you will be in the home for 10, 20 or 30 years, you are far better off paying points. On a 30-year mortgage for $200,000 with zero points, you would be paying about $400,000 more in interest over 30 years with the 6 percent loan.
Origination points
In today's mortgage market (as of September 2025), origination points on conventional loans are a standard practice among lenders, though they are often negotiable and not always mandatory. These fees, typically ranging from 0.5% to 1% of the loan amount, cover the lender's processing, underwriting, and administrative costs. For example, on a $300,000 loan, this equates to $1,500, $3,000 at closing. While some lenders bundle them into flat origination fees or offer "no-fee" options (often in exchange for a slightly higher interest rate), they remain common'especially on conforming loans backed by Fannie Mae or Freddie Mac'because they help lenders manage overhead in a competitive environment.