Want a great way to save thousands of dollars over the life or your mortgage? Pay discount points before you buy. The money you pay up front reduces your interest rate and lowers your monthly payment. But if you know you won't be in the house for the long haul, you might want to skip the points and shell out a little more cash each month. Points are tax deductible. And every point you buy will reduce the interest on your mortgage by one-eighth to one-quarter percent. Points cost one percent of the loan amount-payable at closing. So, if your mortgage is a hundred thousand dollars, you'll spend a thousand dollars a point. To reduce your interest rate from seven and a quarter percent to seven percent, you'll spend two-thousand dollars on two points.

Over the life of your loan, you'll save more than six thousand dollars-triple your investment in points. Pay four points and you save 12-thousand dollars over 30 years. If you know you'll be moving in a few years, it's probably best to pass on the points. You won't live in your home long enough to get a good return on your initial investment. Shop around for the best interest rate you can find, consider how long you'll be living in your new home, and then make your decision