The direct answer
Seller-paid discount points are an agreed financing concession that can lower a buyer's mortgage pricing under the lender's terms. For the seller, the principal effect is a reduction in settlement proceeds, but the payment must be evaluated alongside offer price, concession limits and the lender's disclosure of points and credits.
Confirm the lender's point charge
A mortgage point is commonly quoted as 1% of loan amount, but the effect on interest rate is not standardized. Obtain the lender's actual pricing and disclosures.
To apply the approach to an editable scenario, use the Home Sale / Seller Net Proceeds Calculator. For the neighboring question, explore Real Estate Commission Calculator.
Check contract and program limits
The permitted seller contribution may depend on loan type, occupancy, down payment and lender requirements. Never assume an agreed credit can be applied without restriction.
Compare all-in net offers
Consider seller-paid points, other credits and purchase price together. A buyer seeking a rate buydown can propose a higher price that does not necessarily improve seller cash.
Worked example
On a $400,000 mortgage, two points would be $8,000 before other loan charges. If the seller agrees to fund the $8,000, illustrative seller net proceeds decline by that amount, absent an offsetting contract-price change.
Open Home Sale / Seller Net Proceeds Calculator and test your assumptions →
Common mistakes and limitations
Do not calculate the actual rate reduction from points using a universal rule; lender pricing varies.
Estimate only; actual payoff statements, taxes, title/escrow charges and local transaction costs can differ.
Frequently asked questions
Does one discount point always reduce the rate by a fixed amount?
No. The pricing benefit depends on the lender and loan terms.
Do seller-paid points reduce seller cash?
Yes, when the seller funds them under the approved closing arrangement.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- CFPB — What documents should I receive before closing on a mortgage loan?Loan Estimate and Closing Disclosure timing, purpose and borrower review context for covered mortgage transactions.
- CFPB — How should I use lender credits and points (discount points)?Interest-rate, discount-point and lender-credit tradeoffs and disclosure context.
Read our editorial policy for the scope of these educational methods.