FinancingDeed_of_trust_structureMEDIUM
Elena purchases a property in Norfolk, Virginia for $600,000. She secures a deed of trust loan for 75% of the purchase price at an annual interest rate of 5%. The deed of trust also requires the lender to be paid 2 discount points at closing. How much will Elena pay in discount points at closing?
Correct Answer
A) $9,000
Step 1: Calculate the loan amount. Loan amount = $600,000 × 75% = $450,000. Step 2: Calculate the cost of 2 discount points. Each discount point equals 1% of the loan amount. 2 points = 2% × $450,000 = $9,000. Elena will pay $9,000 in discount points at closing.
Answer Options
A
$9,000B
$7,500C
$15,000D
$12,000Why This Is the Correct Answer
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Why the Other Options Are Wrong
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Background Knowledge for Financing
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Key Terms:
deed_of_trustdiscount_pointsloan_amountmathclosing_costs
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