Points?? Does anyone know how a bank comes up with the points?

If a rate is 6.3 % and the APR is 6.5% how do they figure that the points are .75 when the rates out there are in the 5's or low 6's. I'm so confused as to why I would have to pay so much for a rate of really 6.5%.

Thanks in advance.

Re: Points?? Does anyone know how a bank comes up with the points?

a point is 1%. there is no figuring it out. one point = 1% of the loan amount.

APR and APY are different than points. your APR is your rate. due to daily compounding, you are really paying the APY. (annual percentage yield) -

Re: Points?? Does anyone know how a bank comes up with the points?

Re: Points?? Does anyone know how a bank comes up with the points?

Thanks. I did know that a point is 1%. I don't think that I worded my question right...but I really don't know how to.

The bank gives me a rate and says that I have to pay .75 of a point to get that rate. How do they figure that??

Does that make more sense?

Re: Points?? Does anyone know how a bank comes up with the points?

well, it could mean the bank is ripping you off. sometimes mortgage brokers charge you points to make money.
call around to different banks and see who offers you the best rate with no points!

Re: Points?? Does anyone know how a bank comes up with the points?

I would call around too but it could be that in order to get the rate you want you have to pay the points which in some cases is just prepaid interest. Points are only worth it if you are going to stay in your house for over 5 years. I didn't pay any points but that is because I told my broker from the beginning I don't want to pay any points. Sometimes even if you go through a bank they will charge points too

Re: Points?? Does anyone know how a bank comes up with the points?

maybe its a buy down rate?