paid on the home. As always, please check with a tax professional on exactly what you can and can't deduct for your personal situation and as per law. Some of the nondeductible items may include home repairs, general closing charges, homeowners’ association dues, as well as property hazard insurance premiums. Getting a loan to purchase a home can be a tricky business, and there are terms one might find hard to understand — e.g., the term “mortgage points,” which refers to the interest that’s been prepaid. It’s possible to lower your mortgage loan’s interest rate by
“buying points.” Mortgage points, or discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” and will decrease your monthly mortgage payments.
One point costs 1% of your mortgage amount (or $1,000 for every $100,000). Essentially, you pay some interest upfront in exchange for a lower interest rate over the life of your loan. In general, the longer you plan to own the home, the more points help you save on interest over the life of the loan. For example, Bank of America, Better Money Habits, uses a chart illustrating points using a loan amount of $200,000. The amount of cash you’ll save by buying the points depends on the number of points you buy. For instance, if your mortgage is $200,000 and you buy two points, you will owe $4,000 when closing. Keep in mind that while paying points may lower your mortgage rate slightly and consequently your mortgage payments, that money could have been used for other things such
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