1 discount point =

• A. 0.5%
• B. 2%
• C. 1%
• D. 3%

Answer: (C)

One discount point equals 1% of the loan amount paid upfront to buy down the interest rate. For a $350,000 loan, that means paying $3,500 at closing. The benefit is a lower interest rate and smaller monthly payments, though the exact rate decrease per point varies by lender and loan program ( a common rough guide is about 0.25 percentage points per point). The key idea is balancing that upfront cost against the monthly savings over the life of the loan, often assessed with a break-even calculation to see how long it takes for the savings to cover the point cost.