The Inverse Relationship of Points and Interest Rates
Your interest rate and the points you pay on a loan are not mutually exclusive. Points are typically paid when the borrower gets a lower rate, but always remember that points are essentially a sales fee.
One of the reasons that it's wise to talk to a tax or personal finance advisor is that your tax situation might determine whether it makes sense to pay points or go with a higher rate — there's no general rule of thumb. Points are deductible in the year you buy a home, while they're gradually deductible over the life of a refinanced loan.
If you're going to make a comparison of loan products from different lenders, make sure you're comparing the same type of loan (first mortgage or refinance) with the loan term and the same number of points.
You can use online lenders to get an idea of fee structures on various home purchase and refinancing loans before you start comparing rates at banks and brokers. Internet lenders may not necessarily be cheaper in the long run, but it makes sense to go through their process as far as you can without a formal application to get a sense of what you'll pay for a loan.
