What is the difference between interest and points?
I was reading Express Home Buyers Loan Program, and they say there interest rate is 12% and 5 points.
http://www.sell2us.net/finance-hard.htm
What does that mean?
I will try to explain this as simply as possible.
Interest is the amortized rate that you will pay on a loan. Points are a one time fee that you pay for a particular rate/scenario.
When shopping for a mortgage, many lenders will quote you rates with points or you can ask for a rate with points.
Each point represents 1% percent of the amount you are borrowing. Generally, paying one point should lower the interest rate on a loan 1/4%, 2 points should lower your rate 1/2% and 3 points should lower the rate 3/4%. Lowering the rate reduces your monthly principal and interest payment.
In your particular case, with a HML, the points are in essence their fee for loaning the money.
Ok Thanks,
So based on a loan of $300000.
I’ll be paying $36000 in interest and $15000 for the points.
That sound correct?