What is a 'point' (discount point) in mortgage lending?

DISCOUNT POINTS: A point equals 1% of the LOAN AMOUNT (not the purchase price). On a $200,000 loan, one point = $2,000. PURPOSE: Discount points are prepaid interest paid to the lender at closing to BUY DOWN (lower) the interest rate; roughly, one point lowers the rate by about 0.25% (varies by lender/market); the borrower pays more upfront to get a lower rate and lower monthly payments over the loan life; BREAK-EVEN: Paying points makes sense if the borrower keeps the loan long enough for the monthly savings to exceed the upfront cost; ORIGINATION POINTS/FEE: A separate charge for processing the loan (lender's compensation), also often expressed as a percentage of the loan; TAX: Points may be tax-deductible (consult a tax professional); LENDER vs SELLER paid: Points can be paid by buyer or seller (negotiable); understanding points (1% of loan amount, used to buy down the rate) is fundamental mortgage finance knowledge for brokers and a common national exam calculation/concept.