Points are mortgage interest fees that you pay at the time of closing. One point is equal to 1 percent of the amount of the credit line. Points are usually paid at closing and are in addition to monthly interest. This payment substantially reduces the initial interest rate. Points are calculated based on the amount that you pay upfront and more the point lower the interest rate for you. For example, a two-point loan will always have a lower interest rate than a one-point loan while a one-point loan will have a lower interest than a zero-point loan.

No-Point Mortgage
No-point is a special type of mortgage where you do not pay any costs during the closing. A no-point loan does not include the lender's title insurance, survey, attorney's fees, appraisal, credit report, document preparation, and underwriting fees etc.  

A No-point loan is appropriate if you are short of cash for the down payment. Opting for a no-point loan in such a situation will help you save substantially.

When should you opt for a No-point Mortgage?

Shortage of cash for down payment- A No-point loan is appropriate if you are short of cash for the down payment. You can opt for a no-point loan in such a situation and save significantly.

You wont be residing in the property for long - You need to reside in the property for at least 4-5 years to realize the benefits of points. If you don’t have such plans for a long stay, you can ideally opt for a no-point mortgage.

Less equity in your property - You can opt for a no-point mortgage if your property hasn’t built any appreciable equity so that you can refinance it.

The effects of Tax on points
You would typically need to amortize points over the life of the loan in case you are refinancing for the first time. For example, on a typical 30-year loan, you can deduct 1/30th of the points paid each year. If you are refinancing for a second time, you may deduct the residual unamortized points in the year.