There are a number of things to consider when deciding whether or not it makes sense to pay points. The first thing to consider is whether you are getting a mortgage to purchase a new home or refinancing your current mortgage. The rules for the deductability of points on your tax return is different for purchases and refinances. Points on purchases are generally deductable as prepaid interest the year you purchase your home. The deductability for points on refinances are generally spread out over the life of the loan. If you have not deducted all the points when the refinance loan is paid off you can deduct the remaining balance of the points in the year the loan is paid off. You should check with a tax advisor for your particular situation.

You also need to consider how long you intend to keep the loan. The "payback period" for points generally runs between 54 months and 72 months. The longer you plan to keep the loan, the more it may make sense to pay points.

Even if you're unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? I can help you sort it out. It's part of our finding the right loan for your means and goals.

A point -- which equals one percent (1%) of the total loan amount -- is an upfront fee that lowers your monthly interest rate and total interest due over the life of the loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are a lot of points packages that can make a loan's terms more favorable if that's what's right for you.

There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. I will be happy to review options with you to decide which combination will best meet you needs.