"Each mortgage point … is 1 percent of the loan amount, and so what happens is you can pay money -- up front, cash -- in the form of mortgage points," says Dr. Walden, a professor of agricultural and resource economics. "What you get back is you get back a lower interest rate on the loan.

"So in essence you are prepaying some of the loan, or you are paying to get a lower interest rate," he adds. "Now, is that good or bad? Well, it depends. And it depends on a lot of things.

"For example, one thing it depends on is whether you have the money to pay the points. If you don’t have the money, then it is a moot point (no pun intended). But if you do have the money that you could pay the points, what it fundamentally depends upon is how long you are going to carry that loan," Walden explains. "Generally speaking the longer you are going to carry that loan, the longer you are going to be in the house, the more advantageous it is for you to pay the points to get the lower interest rate.

"If you are only going to be in the house for a couple years, for example, likely you are not going to recover enough in terms of lower mortgage payments to equal the points that you paid," he concludes. "So you need to look at this in terms of the timing, how long you are going to carry the loan."