Finance
In Montana, 'points' paid on a mortgage as 'origination fees' are characterized as:
ATax-deductible only if paid by the seller
BCompensation to the lender for originating the loan, sometimes tax-deductible for the buyer (consult a tax professional for specifics)✓ Correct
CIllegal under Montana state law
DOnly required for government-backed loans
Explanation
Origination points are compensation to the lender for making the loan. They may be tax-deductible for the buyer (particularly for purchase loans) as prepaid mortgage interest, subject to IRS rules.
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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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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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