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Lenders have different rate and point combinations for their loan products. Points can be positive or negative. The most common type of points are positive points, which means that fees are paid to the lender at closing. Negative point or rebate points are fees that are credited by the lender at closing. One point is equal to 1% of the loan amount. For example, one point on a $200,000 loan amount would be equal to $2,000.
The higher the points, the lower the interest rate. The lower the points, the higher the interest rate. There is not one combination that is the best for everyone, because the perfect combination for each borrower differs according to their situation. With higher points, you pay more in closing costs at the beginning of the loan, but in return, you receive a lower interest rate and lower monthly payments. If you choose a loan with low or negative points, you will not need to pay as much in closing costs, but your interest rate and monthly payments will be higher.
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