Finance
Discount points paid on a Michigan mortgage loan are used to:
APay the real estate agent's commission
BPrepay interest to lower the loan's interest rate✓ Correct
CCover title insurance costs
DFund the escrow account
Explanation
Discount points are prepaid interest paid at closing to reduce the loan's interest rate. Each point equals 1% of the loan amount and typically reduces the rate by about 0.
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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.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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