Should I pay mortgage points?Answer:
The decision to pay mortgage points depends strictly on the borrower's plans and financial situation. Borrowers should know that mortgage points are fully tax deductible in the year they were paid for a purchase transaction. If you paid mortgage points on a refinance, points will be deducted from your taxes throughout the years of the new loan.
How to decide to pay mortgage points, or not?
Basically, if you are planning on staying in the house for long and want to lower your monthly payments, you are likely to decide to buy points to reduce the rate.
If you are keeping the house for several years only, don't bother paying points if you know you will be refinancing or selling the house. The same goes for rebates - if the lender pays mortgage points on your behalf the rate goes higher but you will have little or no closing costs to worry about and you could do that if you are severely short on cash, or simply plan on moving out soon.
If you are uncertain about your plans, you are advised to use a mortgage calculator to find out more precisely what happens if you choose to pay points on a mortgage loan and when the break-even occurs.
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