| Points are deductible on your Schedule A, 1040 IRS | | | | different mortgage terms, but other lenders will allow |
| return. That's good, if you paid them and know what | | | | more discount points up to a set maximum. What you |
| they are. As always, there's something more to learn. | | | | want to avoid is being in either a break-even or paying |
| A discount point is an additional fee you pay to your | | | | more than you would without the discount points. |
| mortgage lender in return for a reduced interest rate. | | | | To find your break-even point, use a mortgage |
| What this means in real terms on the cost of your loan | | | | calculator to calculate the monthly payment with no |
| is best worked out with a mortgage calculator - in | | | | discount points at the stated interest rate. Then |
| particular, a mortgage points calculator. | | | | calculate the payment as it would be if you paid for |
| Generally one discount point is the equivalent of 1% of | | | | discount points. Take the lower total from the higher |
| your total mortgage. This translates to a 0.125% on the | | | | total to determine how much you can save in a month. |
| agreed interest rate. In other words, you are paying a | | | | Finally divide the cost of the discount points by the |
| small amount of your overall interest in advance. This | | | | monthly amount saved. This will give the amount of |
| payment is made upon closing the mortgage, with your | | | | months you will have to keep the property to break |
| mortgage lender setting the cost of the discount point. | | | | even on paying for the discount points. If you don't |
| Although it is your lender who sets the value of the | | | | intend to keep it that long, then discount points are not |
| discount prices, you can do some work in advance by | | | | worth considering. |
| using a mortgage calculator to see what difference | | | | If you are buying your home as a short-term |
| the points will make to your monthly payments. There | | | | investment, then discount points are probably not going |
| is less advantage to buying additional discount points if | | | | to benefit you. But if you are purchasing your lifetime |
| you do not intend to live in the property for at least the | | | | dream home, then use a mortgage calculator to |
| greater part of the mortgage period. So, they are not | | | | determine how many bonus points will give you the |
| always a good thing. Using a mortgage points | | | | best possible monthly payment. |
| calculator you can input various "years in home" figures | | | | Stay awake when your lender starts talking. Or at |
| to see how it affects the overall financing of your | | | | least get it in writing before you sign. Then take |
| home with and without discount points. | | | | advantage on the online mortgage calculators to see if |
| Use the mortgage calculator to work out each of the | | | | the rates and fees and points they want to charge |
| options that your lender quotes you. Some mortgage | | | | are something you can live with. |
| lenders will allow 0-2 discount points, with variations for | | | | |