Finance
The discount points paid by a borrower at closing primarily serve to:
AReduce the lender's origination fee
BLower the interest rate on the loan (buying down the rate)✓ Correct
CIncrease the loan amount
DCover the cost of the appraisal and title search
Explanation
Discount points are prepaid interest paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount. Paying points makes sense when the borrower plans to keep the loan long enough to recoup the upfront cost.
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