Discount points are prepaid interest, which you can pay to your broker at closing in exchange for a lower interest rate on your mortgage. Paying discount points, each of which is equal to 1% of the loan amount, is often called "buying down" your rate.

So does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home, let alone the mortgage you are about to close on. First, find out how much lower your monthly payments will be if you buy your rate down by paying points. Then, calculate how long it will take for those monthly savings to add up to the cost of the points you paid. If it would take five years to break even and you're planning to live in your home for 10, paying discount points may be a smart move. Talk with your local mortgage professional Mortgage Info Guide at and info@themortgageinfoguide.com to decide whether or not discount points are a smart move for you or not.