Let's look at our example again. That's because the interest is based on the amount still owed. Sussman points out that lenders are required by law to tell you what the APR will be, not just the interest rate. By the way, if you finance the points, and then turn around and sell the house after a year or two, you are still paying those points since they have become part of the loan that has to be paid from the proceeds of the sale. While points add to your APR, they can also reduce your interest rate.
Some lenders offer discount points to consumers in lieu of a higher interest rate.
Here's an example. In this way the borrower pays the points up front and has a slightly lower interest rate down the line. If you are offered such a choice, you have to figure out how long you plan on living in the home. If you know you'll be moving on in a few years, it's probably wise to pay the slightly higher rate. Here's an example.