Lending organizations such as banks, saving and loan, and insurance companies charge “points” on loans as a way of indirectly increasing the effective interest rate being charge in loans. Points are a percentage of loan value and vary widely at different times. In a related way, developers who want to sell assets sometimes “buy-down” interest rate on loan money by paying an up front lum-sum to lending agencies can loan to persons at a lower rate. However, the developers typically adds the buy-down charge to the price of the property being sold. The buyer needs to understand the economic principles related to “points” and “buying down” interest to make valid investment decisions that involved these considerations.
“You can learn from anyone even your enemy”. Ovid
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