What if you find out you cannot afford the risks associated with an adjustable-rate mortgage? Then the logic is you should go for a fixed-rate mortgage.
The benefits of such loans are they are easier to find and maintain.
Matters of the interests
What is it? An interest rate is the annual amount a lender charges you for borrowing its money. Therefore, the interest rate on a fixed-rate loan must always sbe quoted with the points on the loan.
Points
What are points? These are the upfront fees paid to your lender (e.g. a bank) when you close on your loan. For example, a lender that says 1.5 points on a quoted loan, you should be paying 1.5 percent of the amount you borrow as points. Then for a $100,000 loan, 1.5 points will cost you $1,500. Therefore, points are actually prepaid interest. These are tax deductible like the interest portion of regular monthly mortgage payments.
Another useful scenario is this. Let’s say one lender offers you a 30-year mortgage at 5.75 percent. Then another lender offers the same mortgage at 6 percent. In this case, the 6 percent is not necessarily lousier. You have to think in terms of the points they (lenders) charge.
Interest rates and points that are found on a fixed-rate loan work hand in hand. They also move in the opposite directions. Having this said, the lender is willing to lower the rate of interest if you are willing to pay more points for a specific loan. Therefore, when you pay more points initially, you are able to save a lot of money in interest. Why is this? If you do a simple calculation, a lower interest rate that stretches for a long 30-year loan is more beneficial. Who should pay less points? The answer is people who do not have much money for closing on their loans.
Conclusion
You should always be careful of lenders who are advertising their loans with no points. When loans have no points in them, they are almost guaranteed to have higher interest rates.