Savings

• If a borrower purchases four points with a home mortgage lender, they will pay an extra $8,000 out of pocket on a $200,000 home loan, according to GinnieMae.gov. Borrowers with little savings can benefit from avoiding points altogether so that they can set money aside for an emergency fund as a hedge against unemployment or unexpected repairs.
  
  

Closing Costs

• Some lenders offer no (or low) closing cost loans. According to Bankrate.com, lenders make up the closing costs by charging a higher interest rate. If the borrower purchases too many points, the fees to process and underwrite the loan may go up. This means that borrowers may make higher upfront payments to obtain a loan in the form of both points and closing costs.
  
  

Rate Fluctuations

• Interest rates fluctuate over the lifetime of a mortgage. With a fixed rate or adjustable rate mortgage, borrowers put themselves at a disadvantage if interest rates drop over a period of a few years. If a borrower pays an 8 percent interest rate and the average refinancing rate drops to 5 percent, he can simply refinance the loan. When paying points, the borrower negates the advantage of refinancing, because the points they purchased provided them with an artificially low interest rate.
  
  

Deduction

• In the U.S., borrowers utilize the mortgage interest tax deduction. According to the Internal Revenue Service, debtors can write off all payments of interest made on a home loan for a primary residence. This deduction can offer significant tax savings. If the borrower receives a lower interest rate through points, they receive a lesser deduction.
  
  

Temporary Residence

• It takes years for a buyer for recoup the interest savings from the purchase of points. According to FannieMae.gov, a borrower who buys four points at $8,000 will typically receive an interest rate half a percent lower than they would otherwise qualify for. The borrower must save $8,000 in interest charges before breaking even. If the homeowner plans to sell the home in a few years, they will lose money on points.