Finance
In South Dakota, 'points' paid on a mortgage loan are:
APenalties charged for late payments
BPrepaid interest where 1 point equals 1% of the loan amount, typically paid to reduce the interest rate✓ Correct
CThe lender's profit margin on the loan
DAnnual fees charged for loan maintenance
Explanation
Mortgage points are a form of prepaid interest. One point equals 1% of the loan amount.
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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.
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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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