Should I pay points?

B

It depends upon how long you remain in the mortgage. For example, let’s say your rate on a $300,000 mortgage is 7% and your payment is $1,995/month. Paying 1 point (1% of the loan amount) costs $3,000 at closing but lowers the rate to 6.5% and delivers a payment of $1,896 per month. You pay $3,000 today to save $98.80 per month. This can be a good investment if you remain in the mortgage long enough to recover the costs ($3000 / $98.80 = 31 months to break even).