Finance
A point paid on a mortgage loan is equal to:
A1% of the purchase price
B1% of the loan amount✓ Correct
C$1,000 regardless of loan size
D0.1% of the loan amount
Explanation
One mortgage point equals 1% of the loan amount. Points can be paid to 'buy down' the interest rate (discount points) or charged as origination fees by the lender.
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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.
Math Concepts
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