What are discount points in mortgage financing, and how do they affect rate and payment?

• A. Fees charged for late payments; increase payment.
• B. Prepaid property taxes; no effect on rate.
• C. Points are fees to expedite closing; increase payment.
• D. Points paid to reduce the interest rate; typically 1 point equals 1% of loan amount; lowers rate and reduces payment.

Answer: (D)