Mortgage points (discount points)
Mortgage points are a one-time fee you pay the lender, either to cover the cost of making the loan or to lower your interest rate. One point equals 1 percent of the loan amount.
New Jersey example
On a made-up $350,000 loan for a Bergen County home, paying 2 points to lower the rate would cost $7,000, which is 2% of $350,000. A rate lock agreement usually spells out how many points you will pay at closing.
Official source
This is a plain-English summary. Rules and dollar amounts change, so check the official source or a professional before you file or sign anything.