Finance
A 'points' charge on a NC mortgage loan represents:
AThe annual interest rate on the loan
BPrepaid interest, where each point equals 1% of the loan amount✓ Correct
CThe origination fee paid to the title company
DThe monthly PMI premium
Explanation
Mortgage points (discount points) are prepaid interest; each point equals 1% of the loan amount. Paying points upfront reduces the interest rate on the loan.
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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.
Math Concepts
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