I believe this question is referring to purchasing a discount on a loan's interest rate by putting more towards closing costs. For mortgages, sometimes they will allow you to "buy" a smaller interest rate. For example: <span>Loan A has an interest rate of 4.5% and no closing costs. </span> <span>Loan B has an interest rate of 4.375%, but has $1000 in closing costs. </span>
<span>Normally, Loan A would be the better choice if you plan on keeping the home short term, but Loan B would be more beneficial for keeping the loan long-term. I don't really care to spend the time that is necessary to come up with an actual scenario, but I hope that helps enough for you to understand the question.</span>
