What is a mortgage point and what does it cost?

A mortgage point is an upfront fee paid to a lender at closing in exchange for a lower interest rate over the life of the loan. The exact cost varies by lender and loan amount, so a borrower should ask for a side-by-side quote showing the rate with and without points before deciding. Points make the most sense for a buyer who plans to keep the loan long enough to recover that upfront cost through the lower monthly payment. A lender can calculate the break-even timeline for a specific loan amount and rate combination.