Finance
Discount points paid on a mortgage loan are best described as:
AFees charged for late mortgage payments
BPrepaid interest paid upfront to reduce the interest rate over the loan term✓ Correct
CProcessing fees charged by the lender for originating the loan
DInsurance premiums paid to protect the lender against default
Explanation
Discount points are prepaid interest paid at closing to 'buy down' the interest rate. Each point equals 1% of the loan amount. Paying points is advantageous when the borrower plans to keep the loan long enough to recoup the upfront cost through lower monthly payments.
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