Paying points may not benefit all borrowers

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"I have been shopping online for a 30-year fixed-rate mortgage. All the sites ask you how much you want to put down, and all offer different combinations of interest rate and points. I have cash of only $15,000 to apply to either down payment or points on my $500,000 purchase, but obviously I can't use it for both. Where do I get the biggest bang for my buck?" Using your cash to pay points lowers the interest rate. (Points are upfront payments expressed as a percent of the loan). Using your cash for down payment reduces the amount you must borrow, and might or might not reduce the rate on the second mortgage if there is one, or reduce the mortgage insurance premium if there isn't. Which use of cash generates the lowest cost? There is no general answer to the question; every case is different. To answer the question in individual situations, Chuck Freedenberg and I developed a calculator that shows the total cost of any allocation of cash, over any time period specified by the user. C...