In mortgage lending, a point equals 1% of the total loan amount. Points can refer to origination points (the lender's fee for making the loan) or discount points (prepaid interest used to buy down the interest rate). Paying one discount point typically reduces the interest rate by 0.25%. For long-term holds, paying points to secure a lower rate can save significant money over the life of the loan. For short-term investments like fix-and-flip projects, minimizing upfront points preserves capital even if the rate is slightly higher. The break-even analysis between points paid and monthly savings determines the optimal strategy.