Finance
The term 'points' in mortgage financing always refers to:
AFees charged by the appraiser
B1% of the loan amount✓ Correct
CThe origination fee only
DAny percentage of the purchase price
Explanation
In mortgage financing, 'point' always refers to 1% of the loan amount (not the purchase price). Points can be origination points (lender fees) or discount points (prepaid interest to reduce the rate).
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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