
Two critical components of a home loan are the interest rate and points charged at the outset. The points on a home loan are an up-front fee that equates to a percentage of the loan. Paying one point on a $300,000 loan would equate to a fee of $3,000.
From the lender’s view point, points and interest rates work hand in hand. Generally, the more you pay in points, the lower the interest rate on the loan.
Saving even one percent on an interest rate will save you tens of thousands of dollars in interest payments on a thirty year loan. The bigger point is points and interest rates should be viewed as connected parts of a mortgage.
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