Finance
In New York, 'points' on a mortgage loan are:
APoints on a credit score needed to qualify
BPrepaid interest charges, where 1 point equals 1% of the loan amount, paid at closing to obtain a lower interest rate✓ Correct
CMonthly payment penalties for late payment
DAdditional collateral required by the lender
Explanation
Discount points are prepaid interest on a mortgage loan, with each point equal to 1% of the loan amount. Paying points reduces the interest rate on the loan (a buydown). Whether paying points makes financial sense depends on how long the borrower plans to keep the loan — the longer they keep it, the more benefit they gain from the lower rate.
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