What effect does paying discount points have on the mortgage loan?

Paying discount points on a mortgage loan is a strategy that involves paying an upfront fee in order to reduce the interest rate on a loan, thereby decreasing the long-term cost of borrowing. Each point generally represents 1% of the total loan amount and is paid at closing. As a result, while borrowers incur higher upfront costs due to these points, they benefit from lower monthly mortgage payments over the life of the loan, which can lead to substantial savings on interest payments over time.

This makes the option stating that paying discount points increases upfront costs but reduces long-term interest accurate. The other options do not apply in this context; for instance, discount points do not lower the total loan amount, expand the repayment terms, or necessarily secure a fixed interest rate, as these concepts pertain to different facets of loan structuring and terms. Thus, the strategic use of discount points is focused on adjusting the interest rate in favor of the borrower for long-term savings.