Points are a type of fee lenders charge for mortgages. Origination points are charged for making the loan. Discount points are charged for reducing or "paying down" the interest rate.

Either way, a point equals 1% of the loan amount.

If you are buying a house, the entire amount you pay for discount points is tax deductible the year of the purchase because it is prepaid interest.

If you are refinancing you have to spread the deduction out over the life of the loan. So if you refinanced into a 20-year loan, and paid $2,000 in discount points, you could only deduct $100 a year ($2,000 divided by 20 years).

To determine if paying points makes sense for you, use our points calculator as a guide.