Question

What is the benefit of paying discount points as part of the closing costs? a. Discount points give the buyer a discount on the mortgage. b. Typically points lower the interest rate on the mortgage. The more points that a buyer pays up front, the lower the interest rate. c. Points lower the overall cost of the home. The more points that a buyer pays up front, the lower the total cost at closing. d. Discount points give you a discount from the title company where you go to sign the loan papers. Please select the best answer from the choices provided A B C D

Answer 1

Explanation:

The benefit of paying discount points as part of the closing costs is typically to lower the interest rate on the mortgage. Option B is the correct answer. Discount points are prepaid interest on a mortgage loan, paid at closing to lower the interest rate over the life of the loan. By paying more points at closing, the borrower can lower the interest rate on their mortgage, which in turn reduces the monthly mortgage payment.