Finance
A mortgage 'discount point' paid at closing has the effect of:
AIncreasing the loan amount
BReducing the interest rate for the life of the loan✓ Correct
CEliminating the need for private mortgage insurance
DShortening the loan term
Explanation
Discount points are prepaid interest paid at closing to permanently reduce the interest rate. Each point typically reduces the rate by approximately 0.25%. Paying points makes sense if the borrower plans to keep the loan long enough for the lower monthly payments to recoup the upfront cost.
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