FinanceQuestion 82 of 120
A discount point paid on a mortgage loan generally equals what percentage of the loan amount, and serves to:
a.Ten percent of the loan amount, paid to increase the rate
b.One percent of the sale price, paid to the seller
c.Five percent of the down payment, paid to the county
d.One percent of the loan amount, paid to lower the interest rate
Explanation
One discount point equals one percent of the loan amount and is prepaid interest a borrower pays to buy down (lower) the interest rate. Points can reduce long-term interest costs in exchange for higher upfront cost. Whether points are worthwhile depends on how long the borrower keeps the loan.
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