You pay a percentage of the loan amount, also known as points, to get a lower interest rate on your loan. Buying down your interest rate may make sense if you want lower monthly payments and can afford the cost of points.

Each point is equal to 1% of the loan amount (for example, two points on a $100,000 mortgage would cost $2,000). Points, if charged, are usually collected at settlement with all other closing costs. Negative points reflect the amount that will be credited to you and reduce the amount of closing costs you will pay. Also referred to as discount points.