 TITLE: Should I Buy Mortgage Points? CONTENT: How to Calculate Mortgage Points\n--------------------------------\nYou'll want to figure out the break-even point when you're trying to decide if you should buy mortgage points. This is the point at which the upfront cost you pay to lower your interest rate is matched by the interest savings that result.\nGenerally, each point will cost 1% of the loan amount and will decrease the mortgage's interest rate by 0.25%. We'll use these amounts for the calculations made below, but know that some mortgage lenders may use a different price point or reduction amount.\nRegardless of the cost and rate change, a straightforward way to find your break-even point is to divide the cost of the mortgage points by your monthly savings.\nFor example, if you get a $300,000 mortgage, each discount point costs $3,000. If buying a point on your 30-year mortgage means the interest rate changes from 4.5% to 4.25%, then your monthly payment decreases by about $44 (from around $1,520 to $1,476). Your break-even point is 3,000 divided by 44, which is about 68 months.\nPurchasing more points could significantly decrease your monthly payment, although it might not change your break-even point much. Purchasing three points for $9,000 will decrease your monthly payment by $131 (from about $1,520 to $1,476). However, the break-even point only increases by one month.\nOther factors can also impact your break-even point. For example, you may be able to finance the discount point purchase, but doing so could extend your break-even point due to interest. Additionally, if you purchase points with an adjustable-rate mortgage, the lower interest rate might only apply to the initial fixed-rate period.\nPurchasing points is essentially prepaying interest, which means it may be a tax-deductible expense. If you meet the IRS' requirements, you may be able to take the full deduction in the first year. Otherwise, the deduction will be spread out over the lifetime of the loan. In either case, whether this alters your calculations depends on your overall financial and tax situation. END