Loan discount points are prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (for example, one point on a $100,000 loan would cost $1,000). Usually the more points you pay, the lower the interest rate and the lower your monthly payment.You should consider the difference in the monthly payment and how long you plan to stay in the house. This example shows how paying points can help lower your monthly payments and achieve greater savings over the life of the loan.