What type of loan typically has an interest rate that is approximately a quarter percent higher due to the absence of points?

A no point loan typically has an interest rate that is about a quarter percent higher than a comparable loan that includes points. Points are fees paid upfront to lower the interest rate on a loan. In a no point loan arrangement, the borrower does not pay these upfront fees, and as a result, the lender compensates for the lost income potential by charging a slightly higher interest rate.

This structure appeals to borrowers who may not have the cash available to pay points upfront or who might be looking for lower closing costs. The trade-off for the immediate cash savings is the increased long-term cost due to the higher interest rate associated with the loan.

While other loans such as conventional, subprime, or fixed-rate loans can include points, the defining characteristic of the no point loan is its specific approach to handling upfront costs and interest rates.