Mortgage Points: A Discount You Have to Pay For (Because That Makes Sense) You may hear your lender throw out the term “points” like it’s a rewards system. Spoiler: it’s not. Mortgage points (a.k.a. discount points) let you pay more upfront so you can pay less later. One point = 1% of your loan amount. For example, if your loan is $200,000, one point costs $2,000. That lowers your interest rate, which lowers your monthly payment. It’s like a sale… but in reverse… and you only win if you keep the house long enough to outsave what you paid. If you’re planning to move in two years and live off-grid in a tiny home made of shipping containers, skip the points. If you’re nesting long-term, they might be a smart move. What Can You Deduct? What Can’t You? (AKA: The IRS’s Favorite Game Show) Good news: Mortgage interest is deductible. That means your payments are helping you out when tax season rolls around. You’ll get a lovely little form from your lender called Form 1098, which you’ll want to keep. Bad news: HOA dues, home repairs, and hazard insurance premiums are not deductible. No one really knows why.
Probably because the IRS just likes keeping us humble.
The Tragedy of the Great Loan Fail People spend weeks test-driving cars and comparing waffle irons. But ask them about their mortgage terms? Blank stares and vague shrugs.
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