Refinancing - Points Vs. No Points

When refinancing a home mortgage you will get a lower interest rate if you agree to pay 1 or 2 "points". The loan manager may offer you "6.75% with no points" or "6.25% with 2 points". 2 points means that you will have to pay 2% of the total amount of the mortgage to the lender in addition to any closing costs.

On a $200,000 loan, that's $4,000. Even with the lower interest rate, It can take 5 to 10 years to cover that additional expense. So if you aren't going to be in a house long term, it's better pass on the points.

By Fisher