A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
Correct Answer
B) $6,000
Discount points are calculated as a percentage of the loan amount. Each point equals 1% of the loan amount. For 2 points on a $300,000 loan: 2% × $300,000 = $6,000. This is a fundamental calculation that MLOs must understand for explaining costs to borrowers.
Why This Is the Correct Answer
Discount points are calculated as a percentage of the loan amount. Each point equals 1% of the loan amount. For 2 points on a $300,000 loan: 2% × $300,000 = $6,000. This is a fundamental calculation that MLOs must understand for explaining costs to borrowers.
More Mortgage Knowledge Questions
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