Finance
Which of the following statements about mortgage points is accurate?
APaying more points always results in a lower monthly payment
BDiscount points are prepaid interest that reduce the mortgage interest rate, with each point typically reducing the rate by 0.25%✓ Correct
CPoints are tax deductible in all circumstances for all borrowers
DPoints are only charged on FHA and VA loans
Explanation
Discount points are prepaid interest paid at closing to permanently reduce (buy down) the interest rate. Typically, each point (1% of the loan amount) reduces the rate by approximately 0.25%, though this varies by lender and market conditions. Points may be tax-deductible for primary residence purchases, subject to IRS rules.
Related Illinois Finance Questions
- Regulation Z under TILA applies to consumer credit transactions and specifically requires:
- What is 'subprime lending' and what risks did it pose in the Illinois housing market?
- What is 'mortgage insurance premium' (MIP) on an FHA loan and how does it differ from PMI?
- What is the purpose of the Truth in Lending Act (TILA) in Illinois real estate transactions?
- What is 'mortgage insurance' and when is it required for Illinois home purchases?
- What is the debt-to-income (DTI) ratio and how does it affect Illinois mortgage qualification?
- What is a 'reverse mortgage' and who might use one in Illinois?
- What is a 'pledged asset mortgage' and when might it be used in Illinois?
Practice More Illinois Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Illinois Quiz →