Q: With interest rates at historic lows, should I pay points to get a lower interest rate on my mortgage?

As with any mortgage-related question, the answer is a cheerful, yet frustrating, “it depends!”

A point is one percent of the total amount of the mortgage. So, if you are taking on a $150,000 mortgage, one point is $1,500.

The main consideration, is how long do you plan to stay in this home and keep this mortgage? The logic is that the longer you keep this loan, the longer you enjoy the lower interest rate you earn by paying discount points at the closing.

If you plan to move again or refinance within a couple of years, it may not be worth paying points as compared to the shorter-term interest savings.

It’s a common misconception that paying one point yields one percent off your interest rate. That is not the case. Generally, people must pay from four to eight points to knock one percent off the interest rate.

If you might be thinking about borrowing money from family to pay points, the bank will know this, and will take it into consideration as a weakness unless your family states in writing that the funds are a gift and are not to be paid back.

Lenders are known to look back at your banking records for 12 to 24 months to assess your payment history and look for unusual deposits that might be gifts from family members.

During a buyers’ market, as we are in now, it is possible to ask the seller to pay some points. If the seller is eager to close the deal, he or she might agree as a condition of sale.

Finally, discount points are tax deductible – even if the seller pays them for you. So, it becomes important to calculate the effect of paying points by factoring in all three elements:

• time you expect to stay in this house without refinancing
• interest savings over this time frame as a result of paying points as compared to the original cost of the points
• tax deduction

It’s easy to see why there is no one-size-fits-all answer to this – or any mortgage question. Another factor is local market realities where the property is located. That’s why it’s always a good idea to develop a relationship with a local mortgage expert who is an expert on conditions in your market and can advise you sensibly about your best options.