Before you make such a decision, you have to understand exactly what points are. Points are fees paid to the lender at the closing of the mortgage. Each point=1% of the mortgage. If your home loan is in the amount of $100,000, one point would cost you $1,000.

When you pay your monthly mortgage payment, you may have seen that a part of it (however small) reduces the loan and the rest of it pays the interest. At least most home loans work like this. Some lenders have now introduced a new type of loan to attract more customers by keeping the monthly mortgage as low as possible by only paying the interest.

When you pay your monthly home loan payment, you may have seen that a part of it (however small) reduces the loan and the rest of it pays the interest. At least most home loans work this way. But there exist now new kinds of mortgages that only pay the interest.