Closing Points

DEFINITION of 'Closing Points'

Points that are paid at the time of closing of a mortgage transaction. Closing points are paid to either the lender or the broker, and one point equals one percent of the total loan amount. Closing points are also known as discount points or mortgage points. These point are often paid in order to lower the rate of interest on the loan.

BREAKING DOWN 'Closing Points'

In some cases, closing or discount points are required as a condition of loan approval. These points are usually deductible on Schedule A under the mortgage interest section. Points that are paid on a purchase are entirely deductible in the year of purchase, while points paid on a refinancing must be prorated over the life of the loan.

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