“I read recently about a study that says that most people would not profit by paying points on a mortgage. Do you agree with that?”

No. The much-cited study by Yan Chang, senior economist at Freddie Mac, and Abdullah Yavas, research director of the Institute for Real Estate Studies at Penn State’s Smeal College of Business, claims that most borrowers don’t hold their mortgages long enough to make paying points a good investment. The study based its conclusion on the life of fixed-rate mortgages (FRMs) that were originated and terminated during the period from 1996-2003. But almost two-thirds of the loans in their sample were still in existence at the end of the period, and they are bound to have a longer life than those that were paid off. Further, the study did not cover adjustable-rate mortgages (ARMs), which in today’s market provide the most attractive opportunities for paying points.

Even if the study was right, what “most people” would profit from is beside the point. What matters is whether you would profit from it.

Well, then, how do I know whether or not it makes sense for me to pay points?

Points are an investment on which the return consists of lower mortgage payments in the future, and a lower loan balance if the loan is paid off before term, which almost all are. The investment makes sense for borrowers who have the money and find the return high enough to be attractive.

The standard view is that the borrower’s time horizon must be quite long to make points worthwhile — I have made this statement myself many times. However, when I recently calculated rates of return for different types of mortgages, I found that the standard view holds only for FRMs. On ARMs, the returns are high over periods equal to the initial rate period.

For example, while the return over seven years was only 8 percent on a 30-year FRM, on a 7-year ARM it was 22 percent. On a 3-year ARM, the return over three years was 17.5 percent. I found this so astonishing that 10 days later I looked again to be sure I hadn’t made a mistake. Sure enough, I hadn’t.

Do most borrowers pass up this opportunity?

They do. In the sample selected by Chang and Yavas, less than 15 percent paid points. Borrowers are predisposed against an increase in their cash outlays at closing for a benefit that will accrue in the future. Nobody tells them what the rate of return on investment might be. Often, they aren’t even offered the option.

Mortgage brokers and loan officers don’t encourage borrowers to pay points. Points make it more difficult for loan officers working for lenders to earn an “overage” — a price above the lender’s stated price, which the loan officer usually shares with the lender.

Similarly, if borrowers pay points for a lower rate, mortgage brokers are forced to disclose their own fees upfront where borrowers can see and possibly question them. The broker can’t avoid disclosure when his fee must be added to the points. It is much better to steer the borrower to a loan with a rate high enough that the lender will pay points to get it, referred to as a “yield spread premium,” or YSP. Then the broker can pay himself out of the YSP, which existing rules permit to be disclosed in ways that usually mean nothing to the borrower.

How can borrowers be sure that the option to pay points will be made available to them?

One of the advantages of shopping for a mortgage online is that the alternative rate/point combinations appear on the screen. The rates of return shown above were calculated from data shown by one such lender, Amerisave, an Upfront Mortgage Lender. Upfront Mortgage Brokers will also provide the required data. Since their fee is set upfront, they have no financial interest in which rate/point combination the borrower selects.

How do I find the rate of return?

You need two price quotes for the loan type you want. One is the rate/point combination with points closest to zero. The other is the combination for the lowest rate available. Using calculator 11c or 11d on my Web site, enter the two rate/point combinations and the period you expect to be in your house. Presto, you have the rate of return.

In the early 1930s, the Pennsylvania Railroad hired the famed industrial designer Raymond Loewy to restyle its exceedingly ugly electric locomotives. True to form, the Parisian-born Loewy came up with the GG-1, a stunningly fluid design sheathed in streamlined steel. The railroad gamely built a prototype, stitching it together with thousands of rivets in the usual manner of the time. When Loewy was first presented this real-life embodiment of his concept, he demanded in his strong French accent: “What are all those buttons?”

There’s a lesson here for people designing buildings as well: Even a great design can be done in by the sort of unavoidable, nuts-and-bolts infrastructure items every building requires — visible pipes, wires, vents, flues, meters and what have you. As unsexy as they are, don’t fail to think through these kinds of details, don’t put them off to the last minute, and never, ever leave them up to installers to figure out as they go along. Here are some notorious examples:

* Gas meters, electric meters, and electrical entrance panels — none of which are very lovely to look at — should be assigned to a spot that’s completely invisible from the street, ideally in a recessed or screened area. Never place these items on the front of the building. Since meters are ut you should still check with your local utility for any restrictions on placement.

* Figure out where each and every downspout will go. Unless you’re using them as outright ornaments — a rare strategy — the less visible they are, the better. Never put downspouts on the front of the house if the sides will serve just as well. Don’t snake them all over the walls to avoid obstructions — figure out the most direct and least conspicuous route ahead of time. Lastly, don’t use more downspouts than you need. Contrary to usual practice, it’s seldom necessary to have more than one downspout for every 40 feet of gutter.

* Don’t let plumbing vents sprout like acne on an otherwise pristine roof. First off, have your plumber combine nearby vents together at attic level, leaving the fewest possible pipes penetrating the roof.

*If necessary, run the remaining vents laterally so that they exit the roof in a reasonably inconspicuous place. This extra effort will be doubly worthwhile, since in addition to looking bad, plumbing vents are among the most likely spots for leaks to develop.

* Water heater and furnace flues should also be barred from conspicuous roof surfaces whenever possible. In modernist designs, flues can sometimes be used as a design feature, but that trick won’t wash with traditional styles. Instead, you can usually run multiple flues into a single false chimney, which both reduces the rooftop clutter and offers potential for an interesting design feature.

Oh, and about that streamlined locomotive: At Raymond Loewy’s insistence, all the subsequent examples of the GG-1 were built with smooth, welded skins instead of being “buttoned” together with rivets. Today, it’s considered among the great industrial designs of all time.

Why is mortgage interest deductible without limit on two homes and not just the primary residence?

Some accountants have jokingly referred to the concept as the “Congressman’s Rule” because some of our lawmakers have a residence in the nation’s capital and another in their home state.

But what if you happen to own more than two homes? Granted, many people have a difficult time finding the funds for a primary residence let alone a getaway in the mountains or a condo on a desert golf course. But more and more parents are leaving homes to their children, giving the kids a huge asset, sometimes without much notice.

Before 1987, mortgage interest on all residences could be deducted without limit. Since then, consumers with more than two residences are required to choose two “qualified” residences where mortgage interest could be deducted, but the selected residences are allowed to be juggled into the “qualified” category from year to year.

For example, let’s call my personal residence “Seattle” and my vacation home “Palm Springs.” Suppose I’m transferred to Phoenix and decide to buy a home there. Depending upon the purchase prices and considering when “Phoenix” was purchased, I may decide to claim Seattle and Palm Springs as my two residences for this tax year. If Seattle is sold next year, I likely would pick Palm Springs and Phoenix as my residences for next year, depending on when in the calendar Seattle was sold.

A home does not actually have to be used to qualify as a selected residence. If there is no rental or personal use of a residence for an entire year, it can be designated as a selected residence and interest can be deducted. If it is rented or used only occasionally by the owner, no interest can be deducted under the personal-residence rule unless there are at least 15 days of personal use.

The personal-residence rule requires that personal days must exceed the greater of 14 days or 10 percent of rental days. The personal-usage requirement must be met before a property can be designated as a selected residence. If the home is rented more than 140 days, there will have to be 15 days of personal usage before the interest can be fully deducted under the residence rule.

Longer rental seasons are a bonus under the 10 percent rule. For example, a mountain resort home near the ski slopes (for winter sports) and a lake (summer water sports) might be rented for 250 days a year, allowing the owner to use it for 25 days.

Personal use does come at a cost. Depreciation is limited only to the percentage of time that a house is rented. If you rented for 90 days and used it yourself for 10 days, you can take only 90 percent of the total expenses and depreciation.

Another way to catch a few hours at the beach without eating into or exceeding your 14-day or 10 percent limit is to clean the house yourself between renters. Days spent maintaining the house do not count toward the personal-use limit. You can even deduct travel costs to get to the house and expenses such as paint and cleaning supplies.

But if the Internal Revenue Service determines that you were at the house more to sit in the sun than to clean the kitchen and refinish the deck, those days may be added to your personal use and could jeopardize your tax savings.

The house also is supposed to be rented at fair-market value to qualify as a legitimate investment property. If you rent to relatives at discount rates, the IRS may rule that the house is not a business and disallow many of your deductions.

One of the more effective uses of a vacation home as a tax shelter is for future retirement. For example, if you are 50 years old, you can buy a vacation home, furnish it and have renters pay for it while you capture the depreciation for 15 years. When you have taken most of the tax advantages out of it, you can move in and/or convert it to a private residence.

And because most mortgages “front load” interest, you will have used up most of your tax deductions from the mortgage in the 15 years you were working and renting the home before you reached the traditional retirement age of 65. In the later years of the mortgage, when interest deductions are relatively low, you probably will be less concerned about deductions because your income will have fallen off after retirement.

So, if you have home loans, it’s always a good idea to look down the road to see how long mortgage interest will really be a benefit — on one or more homes.