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A point equals 1 percent of your loan amount and is paid up front. The more points you pay, the lower your interest rate. If you plan to keep your loan for at least six years and have enough cash available after the purchase to cover emergencies, you may want to consider paying points.
Example: On a $100,000 fixed-rate loan, the lender offers you a 6-percent rate with no points or 5.75 percent with 1 point. It would take 5.2 years to recoup the $1,000 you paid up front to get the lower interest rate.