Each point that you pay is equal to one percent of the mortgage loan amount. Lenders have to take risks. They are loaning money to a stranger, who may or may not be able to pay the loan in full. If you pay points to obtain a refinance loan, generally they are not deductible in full for the year they are paid. Rather, the IRS requires that you allocate the points by the number of years of your mortgage loan.
Lenders are often willing to trade off points for interest rates.
To do this, compare the monthly payment for both interest rates. Take the difference between these two rates and divide that number into the amount of points you pay. Let's take this example. Seller-Paid Points Everything in real estate is negotiable. Often, a potential buyer submits a sales contract to a seller, and asks the seller to make certain financial concessions in order to make the sale go through.