The rule of thumb is to always try to get the lowest interest rate, right? Some people opt to pay points to get a lower mortgage rate. Typically paying a point will have the effect of lowering the interest rate by a quarter percent (this varies with different lenders). So to lower interest from 6.5% to 6%, you would pay two points, or in our example, an extra $4,000.

There are several other loan options for buyers that want to have a lower interest rate. One option is an adjustable rate loan, which has a lower interest rate initially, but may increase over the life of the loan along with national rates.

All of the interest lowering options have a cost associated with them, either an upfront cost such as paying points at closing, or a delayed cost, such as a higher long-term interest rate over time.

When it comes to deciding whether it is worth pursuing a lower interest rate, think about the value you receive from paying interest. What??? Well, as much as we hate paying interest, there is one compelling reason for paying it, you can take a yearly tax deduction for your mortgage interest.

The lower interest rate means you will pay $65.04 less per month ($780.48 less for the year). Your deduction will be $1000 lower than it would have with the higher interest rate. In the end, you have a vested interest in interest.

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