Here's what I got when I ran for $80k property value and loan of $75k.
Interest Points Monthly APR Prepay
Rate Pymt Penalty
6.375% 3.609% $468 7.706% No
6.750% 1.999% $486 7.934% No
7.125% 0.673% $505 8.186% No
The points in the second column are what you would pay upfront to get a better interest rate. Basically you're buying down the rate. If you want the top line you'd have to come up with 3.969% upfront. In my example, if I want the rate of 6.375, I'd have to pay .03609 * 75000 or $2706.75. This would be on top of the down payment and closing costs. If I didn't have 2700 and a down payment, I could get the last line for downpayment + closing costs + $504.
If you click the link to view closing costs and move through all three examples, it shows that your closing costs are most expensive for the lowest monthly payment.
There are many articles to explain how this works but the gist of them I think is that it only makes sense to pay the points up front if you plan to stay in the house and loan for quite awhile. If you're only staying a few years or if you think you may refinance in a couple years, it may end up costing you more by paying part of the interest up front.
Um, not the best explanation probably so someone correct me if I'm wrong..
