Discount points are the most variable of all closing costs. (In fact they may be either a cost you pay or a credit you receive.) One discount point equals 1% of your loan amount. Although discount points are paid at closing, just think of them as part of the interest cost for your loan. If you elect to pay discount points, you are prepaying interest at the closing table. In exchange for this pre-payment of interest, you receive a reduction (discount) on your interest rate. When we lock your rate, you’ll need to make a decision about discount points.