Real Estate Math
A Vermont buyer pays 2 points on a $250,000 loan. How much are the points in dollars?
A$2,500
B$4,000
C$5,000✓ Correct
D$6,250
Explanation
2 points = 2% x $250,000 = $5,000. Using the values given ($250,000), apply the appropriate formula..
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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.
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