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Should I pay discount points to obtain a lower interest rate?

To determine if it makes sense for you to pay discount points, compare the cost of the discount points to the monthly savings created by the lower interest rate. Each point is equal to one percent of the loan amount.

Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you recoup the cost of the discount points. If the length of time you plan on having this mortgage is longer than the time it will take to recoup the cost, you should consider paying discount points.

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