- 1). Inquire from your lender how much each point you pay will decrease the interest rate on your loan and your monthly payment.
- 2). Compute the cost of each point dividing the amount you are refinancing by 100. For example, if your loan is for $172,000, each point would cost $1,720.
- 3). Calculate the time it would take to recoup the costs of points you paid by dividing the total costs of the points by the amount you would save per month. For example, if paying three points, at a cost of $5,160, would save you $90 per month on your mortgage payment, it would take 58 months, almost five years, before the monthly savings covered the costs of the points.
- 4). Predict how long you intend to remain in your home with your current refinance. If you expect to move or refinance within the time frame for the points covering their costs, you should not pay for the points. However, if you took out a 30-year finance and expect to take the full 30 years before moving or refinancing, you would benefit over the life of the loan.
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