Discount points are a trade, not a discount in the store sense. You pay more cash at closing, and in return the lender gives you a lower interest rate for the life of the loan. Lender credits work in the opposite direction: you accept a higher rate and the lender helps cover closing costs. For buyers in Fairfax, the right choice depends less on the headline rate and more on how long this specific loan will stay in place.
The cost itself is simple. Per the Consumer Financial Protection Bureau, one point equals 1% of the loan amount, so one point on a $100,000 loan costs $1,000. Points do not have to be round numbers: you can pay a fraction of a point or a little more than one. What a point buys is not fixed. The Bureau notes that discount points have no fixed value in terms of the rate reduction, and gives this example: on a $400,000 loan, one point costing $4,000 might reduce the rate by 0.25% at one lender, while another lender could offer a higher or lower reduction for the same cost. Around Ashburn, that is why comparing two lenders on rate alone can mislead you.
Run the break-even math before you decide. Take the total cost of the points and divide it by how much the lower rate saves you each month on principal and interest. The result is the month when the savings finally repay the upfront cost. If you sell, refinance, or pay off the loan before that month, the points cost you money. If you keep the loan well past that month, they can save you money. Ask each lender for the same loan priced with zero points and with points, in writing, so the monthly savings figure is real and not a guess.
You can find the answer on your paperwork. Points appear on page 2, Section A of your Loan Estimate and your Closing Disclosure, and by law the points listed there must be connected to a discounted interest rate. Read that line carefully, because some lenders use the word points for any upfront fee calculated as a percentage of the loan, whether or not it lowers your rate. In Reston and across Northern Virginia, buyers who keep their cash for the down payment, reserves, and moving costs often skip points, while long-term buyers with cash to spare are the ones most likely to benefit. Walk through the break-even month with your lender before you lock.
FAQ
How much does one discount point cost?
One point equals 1% of your loan amount, per the Consumer Financial Protection Bureau. On a $100,000 loan, one point costs $1,000. Points do not have to be round numbers, so you can also pay a fraction of a point, such as 0.5 points, or a little more than one point.
How much will one point lower my interest rate?
There is no fixed amount. The Consumer Financial Protection Bureau notes that discount points have no fixed value in terms of the rate reduction: the reduction depends on the lender, the loan type, and market conditions. Ask each lender to show you the exact rate with zero points and with points for the same loan, in writing.
What is the difference between discount points and lender credits?
They are the same trade in opposite directions. Points mean you pay more at closing in exchange for a lower interest rate and lower payments over time. Lender credits mean you pay less at closing in exchange for a higher interest rate, so you pay more over time. Both appear on your Loan Estimate and Closing Disclosure.
Can the seller pay for my discount points?
Yes. Discount points are typically paid by the borrower, but the Consumer Financial Protection Bureau notes they can also be paid by the home seller or a third party, such as a homebuilder. If you want the seller to cover points, that agreement belongs in your contract, and your lender should confirm how it will be shown at closing.