Do you plan on keeping your loan for a while? Then it may make sense to "buy" a lower interest rate by paying one or more "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?

A point -- which equals one percent (1%) of the total loan amount -- is an up-front 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.

In a cash flow situation, where a borrower has a need to ulilize their cash in other areas where the return potential may be greater, such as an investment property, then spending money now to buy down a rate may not be wise.  However, perhaps one can see a tax advantage as buy-down points are actually pre-paid interest and may be deductable.  How long are you planning to keep the home?  5 years?  25 years?  1 year?  These are the kinds of factors that will dictate whether it's a good choice to buy down a rate, or not.... We'll help you sort it out, so you can make the best choice.