Finance
What is a 'loan discount point'?
AA fee charged by the lender for late payments
BPrepaid interest paid at closing to reduce the loan's interest rate, with each point equaling 1% of the loan amount✓ Correct
CThe origination fee charged to process the loan application
DA penalty assessed when the borrower refinances within 3 years
Explanation
Each discount point equals 1% of the loan amount and is paid upfront at closing to 'buy down' the interest rate. More points generally mean a lower rate. Borrowers must calculate the break-even period to determine if paying points is cost-effective.
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