Zero Cost: This is the same as no-cost loan. Typically no-cost loan will have zero point and zero closing cost. All of your non-recurring costs will be rebated at the time of closing (e.g., broker fees, lender fees, title fees, credit and appraisal fees). However, the borrowers are required to pay recurring costs at closing (e.g., property taxes, homeowner¡¯s insurance-if not currently covered, mortgage insurance-if applicable). They are not rebated and no-cost loans have higher interest rates.

Points: Points (also called discount points) are an up front fees paid to the lender at closing in order to reduce your monthly paid interest rate. Generally, one point equals one percent of your loan amounts. For example, if your loan amount were $250,000, one point would equal to $2500. The number of points owed depends on your lender. The more points you pay, the lower the interest rate is. One other benefit of paying points is that they are tax deductible. So who should pay points? In long term wise, you could be saving money if you plan to keep your loan for many years and you are purchasing, not refinancing. When you refinance, you want to try to keep your cost low by not paying points. If you are planning to keep the loan for a short term or planning to refinance within few years, then it is not the best option.