Borrowers who purchase points to lower the cost of their mortgages often end up paying more than they would have by avoiding points and taking a higher interest rate, a new study points out.

That's because many borrowers tend to overestimate the length of time they'll hold the mortgages, before moving or refinancing, according to study co-authors Abdullah Yavas, a professor of business administration at Penn State's Smeal College of Business, and Yan Chang of Freddie Mac.

The report also finds that borrowers who buy points often treat them as costs they can never recover, so they're less likely to refinance.

Source: Associated Press (12/21/06)