There are two types of mortgage points: discount points and origination points. Discount points are used to buy down the interest rate on the loan, while origination points are used to cover the lender’s administrative costs.
When you take out a home loan, you might have the option to purchase mortgage points. Essentially, this is money that you pay to the lender upfront in exchange for getting a lower interest rate over the life of the loan. If you got a great deal on the house, you might have some extra cash on hand. Should you use that money to buy down the interest rate? This is a math problem that you need to calculate for yourself.