Finance
What does 'points' mean in mortgage lending?
AThe number of years remaining on the loan
BPrepaid interest — one point equals 1% of the loan amount paid upfront to reduce the interest rate✓ Correct
CThe lender's profit margin
DThe number of missed payments allowed
Explanation
Discount points are prepaid interest paid at closing. One point equals 1% of the loan amount. Paying points reduces the loan's interest rate (buying down the rate), which can lower monthly payments and total interest cost over the life of the loan.
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