Real Estate Financing Practice Questions

Points paid at closing are:

Discount points are prepaid interest paid at closing to reduce the interest rate. One point equals 1% of the loan amount. Paying points can lower monthly payments but increases closing costs.

A condominium owner owns:

A condo owner holds their individual unit in fee simple plus an undivided tenancy-in-common interest in the common areas. Owning stock + a proprietary lease describes a CO-OP. Common trap: students confuse condo ownership (real property + TIC common areas) with co-op ownership (stock + lease).

A subordination agreement does which of the following?

A subordination agreement voluntarily lowers a lien's priority, allowing a later lien to take a superior position (common when a construction loan must be first). Common trap: students confuse subordination (changes priority) with novation (substitutes parties) or defeasance (releases lien at payoff).