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1. Buying discount points
Almost half (45%) of home buyers with conventional loans in 2022 purchased discount points to lower their interest, according to Zillow research. Prepaying interest to lower your ongoing mortgage rate, called buying discount points, gains popularity in times of higher interest rates.

Buying one point is equal to 1% of the loan amount and will generally reduce your interest rate by one-quarter of a percentage point. Any number of points can be purchased, and can be applied in fractional amounts, too.

However, it’s a good idea to calculate the upfront cost of buying points and compare that with the discount you receive on your long-term interest rate. Other factors to consider in this calculation include how long you expect to live in the home and your down payment.

Lenders sometimes add a point or two to a mortgage proposal to make their offered interest rate appear more enticing. But remember, you’re actually paying for the discount with an upfront fee.

Tip: When shopping for a loan, compare loan offers with zero points. Then, you can decide later whether to buy points to lower your interest rate.”