The question "Should I Pay Points to Lower My Interest Rate?" is best answered with a good mortgage points calculator.  Starting here http://www.rebuz.com/calc/calculators/should-i-pay-points-calculator.php is a good idea.  Having the ability to compare what your payment will be and how much you will save by paying mortgage points and not paying points is a great financial tool.  By not paying points you will generally be paying more in interest over the life of your mortgage loan.

Understanding the whole points versus interest rates idea behind mortgage financing can be a bit daunting and complicated.  Generally it makes sense to pay points when you have the money and you know that you will have your mortgage for over 5 years.

The definition of mortgage points are fees the borrower pays the lender at the closing, which is expressed as a percent of the loan. An example would be on a $200,000 loan, 2 points means a cash payment of $4,000). The more points that you pay means the lower the interest rate will be.

Therefore if you are planning on staying in your home paying points can be viewed as an investment that yields a return that increases the longer you stay in your house. The return consists of the savings you get in your monthly payment resulting from the lower interest rate.  Additionally the lower loan balance in the month the loan is paid in full is another savings.

Knowing if you should pay points to lower interest rates on your mortgage is something that you have to investigate as the differences in what various lenders offer is vast.  By using this 'should I pay points calculator' you will have a much better idea of what you are getting yourself into and how much it will cost you in the long run. This points calculator lets you see your monthly payment savings, points value and your years to break even.  The more knowledge that you can give yourself will enable you to make the best choices for your situation.