In real estate transactions, what is the primary purpose of discount points?

Discount points are a financial tool used in real estate transactions that primarily serve to lower the interest rate over the life of the loan. When a borrower pays discount points upfront, they are essentially prepaying some of the interest on their mortgage, which results in a lower interest rate for the duration of the loan. This can lead to significant savings over time, as the borrower will pay less in interest each month and overall.

Furthermore, because the reduction in the interest rate can also translate to lower monthly mortgage payments, this makes homeownership more affordable for many buyers. The concept is that by paying more upfront, the long-term financial burden is alleviated, which is appealing to homeowners who plan to stay in their properties for a longer period.

While other options present different aspects of real estate transactions, they do not accurately capture the primary function of discount points. For instance, while buyers may perceive a decrease in closing costs, the payment of discount points typically involves an upfront cost rather than a reduction. Thus, the essence of discount points lies in their ability to decrease the interest rate, making option B the correct choice in this case.