As a broker on the CCIM track and personal investor, I can't stand the concept of buying points on a loan.  Loan points are prepaid interest where you're paying interest upfront in exchange for a lower rate on the loan.  If the loan has a 30 year amortization period and the loan is kept that long, the rate and the yield almost converge.  However, most people sell or refinance every 5-7 years, which means there is a significant spread between what was paid in points and the benefits of the lower rate.  In this case, the borrower is losing out and the lender is making additional money (not always bad depending what side of the fence you're on).

Investors must also pay attention to the fact the points must be amortized over the life of the loan though you make the payment upfront.  So, if you pay $3,000 for 1 point, you're only able to deduct about $100 per year for 30 years.  Looking at the time value of money, you lose.

The concept of points is something that was introduced by the lending industry back when interest rates were above 15% to meet legal requirements to keep rates down.  Lenders made borrowers buy points, thus keeping the rates below legal limits for various programs, and their yields high.  So, if the interest rate were 17%, if you bought 6 points your rate would be reduced below 15%, though with your prepayment of 6 points, the lenders yield would still be 17%.

Investors and home owners, if your lender starts talking about buying points, be upfront with them and ask for alternatives.  Ask what their required yield is and try to work with that.  The rate may be higher, bad if you're shopping rates, but you can deduct the additional expense IN THE YEAR IT WAS PAID rather than amortizing over the life of the loan.  There are case by case exceptions to this but unless your seller is buying points for you, play it straight.