Question

Suppose you buy a house for $196,000 and make a 15% down payment. If you take out a mortgage that requires paying 2 1/2 points, how much will you pay for the points?

Answer 1

Mortgage Points also called as discount points, they are fees paid to the lender to reduce the interest rate on a mortgage.It lowers the monthly mortgage payments. Mortgage points are calculated as percentage of total loan amount. One mortgage point is one percent of the loan.

Cost of House = $196,000
Down Payment = 15% of Cost of house = 15% of 196,000 = $29,400

Mortgage loan = Cost of house - Down Payment
= $196,000 - $29,400
= $166,600

Mortgage points = 2.5%
Payment for mortgage points = 2.5% of Loan amount
= 2.5% of $166,600
= $4,165

Ans : Payment for mortgage points will be = $4,165