Mortgage, points, and tax deduction

Asked by Estherk, Thu Jul 31, 2008

I've been playing with's calculators, and my impressions are that:
1) if I'm paying the points out of pocket, I would recoup the cost in 3-5 years in lower interest payments
2) if I finance the points (fold it into my loan), the points become tax deductible
3) the tax savings make points a worthwhile decision

Bearing in mind that I'm still learning, I just wanted to check the veracity of my conclusions.

And finally, did you pay points for your own house, for the realtors and mortgage brokers/loan officers out there?

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Web reference:


Monir Mamoun’s answer
Monir Mamoun, Agent, Denville, NJ
Sun Oct 3, 2010
Hi Estherk, I did some research and found a link for the IRS page about deducting points. It's actually form 530. I have included the link below. I hope it helps clarify matters. There is a flowchart. Any questions or if you need a referral for a Shakopee agent let me know -- I have a great friend nearby who is a top agent.
1 vote
Sj209, Both Buyer And Seller, California
Thu Jul 31, 2008
My understanding is that you can get financing without points but the rate is much higher. You can tell your loan officer no points and they will let you know it makes more sense to pay points but if you insist they should accomodate your request.
0 votes
Aaron Dickin…, Agent, Champlin, MN
Thu Jul 31, 2008
Yes, that seems to be the standard. If you see someone with a lower rate, check the other fees and/or the interest rate to verify they didn't hide it in there.
Web Reference:
0 votes
Estherk, Home Buyer,
Thu Jul 31, 2008
My understanding is that almost all mortgage brokers/lenders charge 1% loan origination fees which is separate from buying points to get a lower interest rate. Am I on the right track?
0 votes
Jennifer Kir…, Agent, Minneapolis, MN
Thu Jul 31, 2008
I have found that the charging of points varies by state.

In Florida, points are hardly ever charged, in fact, I don't think a single one of my buyers there, including me, has ever paid points.

In Minnesota, every singe banker and mortgage broker I have ever met charges at least one point on the loan. When I moved to Minnesota and asked about this common practice, lenders were actually offended that I disagreed with the blanket charges of points to every buyer in Minnesota.
0 votes
Sj209, Both Buyer And Seller, California
Thu Jul 31, 2008
Make the seller pay for your points. The seller will usually put a monetary limit on the points.
0 votes
Tino Martinez, , Illinois
Thu Jul 31, 2008
I have been a mortgage banker for 21 years and I have paid points on my own purchases. It all depends on how long you really expect ot be in the home. If you are going to be in there for a long time then pay points to get a better rate ( include the points in your new loan if you can ) you will re-coop in a few years. If you plan on selling or refinancing within the re-coop time then negotiate to not pay points. good luck and let me know if I can assist with your new loan.


Tino Martinez
First Capital Mortgage
0 votes
Aaron Dickin…, Agent, Champlin, MN
Thu Jul 31, 2008
1) Yup, sometimes more, sometimes less, depends on the rates that day and how much you buy the rate down

2) The points are tax deductible either way if I recall correctly (check with your tax advisor) but by rolling it in, you are not coming up with the $ out of pocket but are paying it back over 30 years.

3) It can be worthwhile... it all depend on how long you want to stay in your house and how much it costs to buy down the rate.

I'm in the process of buying a house and I'm looking at doing a small rate buydown, but too much buydown ends up costing too much.
0 votes
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