What does 'points' mean in mortgage financing?
Why Prepaid interest — each point equals 1% of the loan amount Is Correct
Answer B: Prepaid interest — each point equals 1% of the loan amount
Exam Tip: Finance
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Key Terms to Know
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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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