The longer a taxpayer plans on living in a home without refinancing the taxpayer's mortgage on the home, the more likely it is that paying points to receive a reduced interest rate on the loan makes economic sense.

Question

Quizplus · Accepted Answer

Paying points upfront to receive a lower interest rate can save money in the long run. However, it takes time to recoup the upfront cost of the points. If a taxpayer plans to live in a home for a longer period of time without refinancing, they will have more time to recoup the cost of the points through the savings on the reduced interest rate. Thus, it is more likely that paying points makes economic sense in such a scenario.

The Longer a Taxpayer Plans on Living in a Home