With loan rates significantly above 6 percent, borrowers are looking for ways to bring them down a bit. One way to do that is to pay what are called discount points. In effect, this is interest that you pre-pay at closing. (Discount points should not be confused with origination points, which are a fee charged by the lender).

Greg McBride, Senior Financial Analyst for Bankrate.com, says before you choose a mortgage with discount points decide how long you are planning to be in that house.

"The longer you're in the home,” he says, “the longer you can benefit from the lower monthly payments that paying points will buy you." McBride says discount points are rarely justified if you plan to have the loan for less than 4 or 5 years.

One other big question you need to ask yourself; how are you going to pay for those points?

“Even if you do have the cash,” McBride says, “consider whether you might be better off adding that cash to your down payment to avoid paying either private mortgage insurance or having to take a larger jumbo loan that carries a higher interest rate."

Here is a link to the Bankrate.com Mortgage Points Adviser calculator: www.bankrate.com. It will help you decide if points make sense and allow you to compare different rate/point combinations to see which is the best choice.

For More Information:

Mortgage Rates Hit 26-Month High -- www.bankrate.com
Paying Points on Loans May Make a Comeback -- www.yahoo.com
Paying Points on a Mortgage -- www.bankrate.com