One mortgage point is equal to 1% of your loan paid upfront at closing in an effort to stick you're a lower interest rate. While it isn't applied to the principle of your loan, it may be beneficial down the road. mortgage points paid are deductible in the following cases:
- The loan secures your primary residence
- The loan was taken either buy, build, or improve the home
- Paying in points is an acceptable and often used option in the location of your new home
- The points are calculated as a percentage of the loan principal
- The buyers settlement statement clearly details points paid
- Down payments, closing costs other cash that you put towards the purchase of your home is at minimum the same amount in points you paid on the loan
Paying points as a method of refinancing, allows you to deduct a portion of what you paid every year for the term of the loan. For example, 1,000 in points spent to refinance a loan for 10 years is equal to $100 per year deduction.