Everything that you need to know about mortgage points Mortgage points are something that you are going to have to pay on your mortgage loan up front, and while you may be able to find a loan that is a no point loan, the majority of loans will have points attached. Each point is a percentage of your loan, for example 2 points is 2 percent of your total loan amount. This is just one of the fees that lenders charge when they offer loans. There is such a things as negative points, these are considered a form of rebate but before you choose to get a loan with negative point you will need to learn all about them. There are some drawbacks to negative point mortgage loans. There is only one thing that these negative points can be used for and that is to defray some of your other settlement costs. Chances are that the lower your overall rate is the more positive points that you have while higher rate loans will have the negative points or rebates. And when you are in the process of choosing the mortgage that is right for you, your mortgage broker or lender will show you different combinations of the rates and points that you can then choose from. Each family has different needs in their mortgage and these combinations give mortgages the flexibility that you need. Not all mortgage loans come with points and making the decision about which loan to choose can be a difficult one, especially if you are a first time borrower who does not know much about the lending market. IF you have some cash on hand and if you are planning on holding onto the mortgage for some time then you should go with a low rate high point type of plan. This way you will be able to reduce the amount that you pay towards your mortgage each month. And if you are looking to find a quick turnover on your property and/or you do not have too much cash on hand you should choose the high rate low point option instead. The latter is not your only option though. You may be able to get your points financed but then you are not getting the same benefits out of them, unless of course your find yourself in one of the lower tax brackets, if this is the case you will be able to earn a higher return on your money and it will be fine. What you need to watch out for is this financing pushing your amount to such an amount that you will now have to pay way more on your mortgage insurance. Make sure to do the math about this beforehand, if you don't you could end up paying much more than is necessary. You will be able to deduct your points if they have been paid in cash but only on the first year, the year that the loan was actually finalized and closed. You can never let your points exceed your down payment, if you do then you will not be able to deduct the points at all. Your down payment and all of your other costs much always exceed the amount of points. If you are refinancing your loan then you need to consider that your points will be treated somewhat differently. You will still get to deduct them but not all at once, instead you will have to spread out the deductions over the entire life of the loan in question. If you are lucky enough to pay off your loan early then you will be able to deduct the rest of your points that year on your taxes. But if you are financing your points this is simply not the case, in this case you will lose any deductions that you would otherwise have been eligible for. Before you meet with any lender you have to determine what these mortgage points mean to you. Do you want to to have them, how many? Do you want negative points? This is important and you will also have to think about the reasons that you are buying this house or property. Are you going to flip it quickly or is this the house that you want to spend years in? These questions matter when it comes tot he mortgage that is right for you and your family, If you know what you want when you go into the meeting the lenders will see this and be less inclined to even try to take advantage of you. If you want to use points to reduce your rate then you need to know just how many points you are going to need and then you can begin looking for a mortgage that has that many points. If it is a rebate that you are looking for then you need to be looking at the different no cost loans on the market, then you can find one that will take care of all your costs. Make sure that you know what all of your costs will be, that is the only way that you will know that your loan will cover all of them. And most important when you are shopping for a loan, do not sign any contracts until all of your concerns have been taken care of because once you have signed the paper nothing else matters except what this contract stipulates. So get all of the promises in writing.