Finance
Points paid on a mortgage loan in West Virginia represent:
AThe monthly payment schedule
BPrepaid interest, with each point equal to 1% of the loan amount✓ Correct
CThe lender's origination fee fixed at 2%
DClosing attorney fees
Explanation
One discount point equals 1% of the loan amount paid upfront to the lender in exchange for a lower interest rate. Paying points is essentially prepaying interest.
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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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