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I had a client tell me today that he planned on staying in his home for at least another 15.  His youngest child will be graduating from college at that time.  His interest in refinancing now is to save on the monthly payment, in part, to help fund his daughter's education.

His current rate is at 7.00% and refinancing into an FHA 30 at 5.50% w/no discount points didn't interest him.  He'd save approximately $185/month but wanted to save closer to $400.  I showed him that we could get close to his $400 target (approx. $350) by paying a discount point to get a 5.00% rate.  This would lower the rate for the life of the loan.  His break-even on the discount point was a little long in my opinion at approximately 7 years but since he planned to stay in his home for at least 15 years he'd wind up saving $350/mo for at least 8 years.  This comes out to a $33,600 savings!

He'd have none of it.  He heard somewhere that you should never pay points.  This is patently false.  It depends on the actual figures and the clients objectives.