Shmoop Finance

See: Mortgage.

Yes, those kinds of points. Interest points. That is, you can pay interest in advance up front to then lower your monthly mortgage payment. Like, if you're borrowing $300,000, you can pay, say, 2 points up front, or 2% of that $300,000, or $6,000.

So...why on Earth would you want to do this? You're paying just the interest to the bank; you get no credit for paying down your mortgage. You're just pre-paying interest you'll owe down the line. Why? Why do this?

Rhymes with shmax-deductible. Yeah. You pay that 2 points up front, and then not only do you get to deduct all of it against this year's taxes, but you get to have a lower monthly payment. Like...your $1,973 goes down to $1,924, or something like that. Over time, that 60 bucks a month adds up. And if you had a lot of taxable income this year, that $6k up front probably saved you a grand or three in taxes to boot.

Good discipline if you're in the target zone.