Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate.
For example, a one point loan will always have a lower interest rate than a zero point loan. Therefore, paying points is a trade off between paying money now versus paying money later. Generally, you should only pay points if you plan on keeping the loan for at least four years. Because points are prepaid interest, you need to be sure you will keep the loan long enough to recoup these costs through lower monthly mortgage payments. The tax treatment of points depends on what the loan is being used for.