They are lending money to a stranger, who may or may not be able to pay the loan in full. But houses can decrease in value, which makes the lender's security potentially risky. It may be possible to get a better interest rate or fewer points from another lender. Refinance points, on the other hand, generally are not deductible in full for the tax year in which 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.
Generally speaking, each point you pay is the equivalent of one-eighth of a percentage point of interest. Everything in real estate is negotiable. Often, a buyer submits a sales contract to a seller and asks the seller to make certain financial concessions to make the sale go through. Such concessions include the seller giving a cash credit at settlement, the seller paying some or all of the buyer's closing costs, or the seller paying some or all of the buyer's points. For many years, the IRS did not allow seller-paid points to be deducted by the buyer.