Discount points refer to a fee that is paid at closing in order to obtain a lower interest rate on a mortgage. Each point equals one percent of the loan amount, and they are used to buy down or reduce the interest rate charged on a home loan. The more discount points a borrower pays, the lower their interest rate will be over the life of the loan. This can result in significant savings for the borrower over time, as it reduces the total amount paid back on the mortgage.