First and foremost I want to break down what points can be charged on your loan and the possible benefits of each.
Originations Points-Origination points are simply fees charged by either a broker or lender specifically to provide the service that they provide to you. Every time they call you or work on your loan this fee pays them to be able to do that. Banks on the other hand do not always need to charge these because their loan advisors typically make a salary so these fees are typically not going to be on the loan. Usually though a banks rates are lower than your broker or mortgage lender.
Broker Points- These fees are exactly the same as origination do not let any mortgage advisor fool you into believing other wise.
Discount Points- These fees simply buy your rate down. If you are looking to get the lowest payment possible then you may talk to you loan advisor about utilizing these to get you a lower payment along with a lower rate.
I want to talk to you about why you should be cautious about a broker or banker who does not charge origination fees. You have to understand that each banker is providing you a service if they do not charge you for this they are not making money off of your loan point being your loan is at the bottom of the stack and they could care less if it closes or not .
It also is an indication you may be working with an inexperienced broker who does not understand what his fees are for. When you pay points for your mortgage it is generally 1-3% depending on how tough your loan is going to be close the more work a loan advisor has to put into the loan the more it is going to cost you. Remember broker and origination fees are tax deductible but if you do a 30 year loan you have to divide the total fees by 30 and you can write off that much for 30 years. Not the best deduction.
Now lets take a look at discount points. The main benefit of discount is that it obviously gives you a lower payment. If your budget is tight this is a good idea no matter what especially if monthly savings is a necessity. Another great benefit is discount is totally tax deductible the following year.
You can write the entire amount off. Why not take your equity invest it into discount get a lower monthly payment and write it off at the end of the year it is a no brainer. Remember though it must make sense if you are only saving an extra 10 bucks a month and it costs you 4000 this is probably not a good idea. Have your lender help you make sure it makes sense. This is what you are paying them to do.
Remember when choosing a lender or mortgage professional it is very important to choose the right one !!