2006-10-20 15:21:14 · 2 answers · asked by dream 1 in Business & Finance ➔ Renting & Real Estate
Interest is the 'rent' paid to borrow money
Points is the number of discount points you need to receive the lower rate. Each point costs 1% of your mortgage amount
2006-10-20 15:23:07 · answer #1 · answered by Diamond in the Rough 6 · 0⤊ 0⤋
I assume you are looking at mortgages.
An interest rate is the fee you pay to the bank or other lender to borrow money. If you borrow $120,000 at 6%, you will pay $7,200 in interest a year or $600 a month.
A point is interest you prepay up front in return for receiving a lower interest rate for the length of your mortgage. If you borrow $120,000 with 1 point, you will pay 1%, or $1,200.
Although not a hard and fast rule, in general, if you plan to stay in the property for only a little while, don't pay points and consider a lower rate mortgage that is fixed for a few years, but turns into an adjustable rate mortgage (e.g. 5/1 or 7/1 ARM). If you think you might stay awhile, get a 15-year or 30-year mortgage and you may want to pay a point or two to get a lower rate.
Look at www.bestrate.com to compare rates.
2006-10-20 22:33:48 · answer #2 · answered by Tony M 2 · 1⤊ 0⤋