A discount point, simply put, is a percentage of the loan amount paid in order to achieve an interest rate that it is generally lower than you will get by not paying it.
In the world of mortgages, the interest rates are somewhat on a scale. People call us and ask, ‘What is your rate?’ And we say, ‘Well, how much do you want to pay? I can get you down to two percent if you want to spend $30,000, but it may not be worth it.’ Interest rate is a reflection of time and money. We rarely recommend paying discount points, unless you are really going to be in the house for a very long time and basically have enough time to recover the greater investment you have made in the rate by buying it down with discount points.