Payments are based on a 30-year repayment schedule. But after a period of five or seven years, the entire balance is due and payable. The homeowner must then pay off the mortgage or get another mortgage and refinance the debt. The advantage is lower interest rates in the early years. Points are considered prepaid interest when paid to obtain or improve a home and are fully deductible on your federal taxes in the year paid.
Some lenders offer a no-points option for a slightly higher rate to avoid paying points.
That's a good deal if you have limited resources for a down payment, but sufficient income to qualify for slightly higher monthly payments. In exchange for an extra point or two at closing, the annual interest rate will be reduced. This can reduce monthly payments and make it easier to qualify for a higher mortgage. But you have to have the cash upfront to do it. See if the lender is a member of the Mortgage Bankers Association, a trade group that encourages members to adhere to a code of ethics.