Mortgage Discount Points

Many are considering refinancing with rates at thier lowest in many years. An interesting approach, rarely mentioned, is the options of buying discount points to lower the rate (rate buy down) even further.

One discount point is 1% of the loan amount, paid at closing. On a $500,000 mortgage one point would cost $5000. and will typically lower the interest rate .25% to .375%, depending on the type of loan. The approach makes sense if you know or plan on keeping the property for five years or more.

Discount points for residential property are tax deductible in the year they are paid. Discount points are available for Re-Fis but those are deductible over the life of the loan. Consult your tax advisor regarding details of these deductions.