Sorry, my fingers slipped!

Cost of points divided by monthly payment savings between 2 interest rates divided by 12 (to make it an annual equation) If you feel you will live there longer than than number of years, pay the points--if not, don't.

Hey there Ben!
Your question about points was answered by us gurus in a post here

As to your question on paying points on the "front" of the loan, it means that you pay cash for them at closing versus having them built into your interest rate. The latter will effect your monthly payment, the former is cash out of your pocket when you close. Here is an equation to decide whether or not to do this: Lump sum cost of points divided by

A "point" is one percent of your loan balance. If you are borrowing $200K, each "point" is $2,000.

Now points come in two types. One are fees to process the loan -- called "origination points." The other are a way of buying down your interest rate -- called "discount points."

Typically, realtors (which is what I am) try to negotiate around origination points. Sometimes you have to pay them -- if, for example, your credit is iffy. If no bank will give you a loan without origination points, well, then, your choice is to pay them, or wait a year and clean up your credit and try again.

As for "discount points," if you don't pay them, you will be looking at current interest rates.

Since we realtors consider current interest rates -- even with the recent bumps up -- low, I'd say you shouldn't pay discount points unless you're planning to stay in the home for several years.

My rule of thumb would be don't pay discount points unless you're going to stay for at least seven years, but Steve is our mortgage god so he can give you a more precise answer . ..