Optional upfront fees paid to lower the loan's interest rate — each point costs 1% of the loan amount.
One discount point typically reduces the interest rate by about 0.25%, though this varies by lender and market conditions. Paying points is essentially prepaying interest.
Buying points makes sense if you plan to keep the loan long enough to recoup the upfront cost. The break-even is usually 4-7 years.
Points are tax-deductible in the year they're paid (when the loan is for a primary residence purchase), or amortized over the loan term for refinances.