Question

A borrower is buying a house for $150,000. She provides a down payment of 10%. If she pays two discount points, what is the total cost of the points?

Answer 1

The total cost of the discount points is $2,700.

Step-by-step explanation:

To calculate the total cost of the discount points, we first need to understand what a discount point is. A discount point is a fee that the borrower pays at closing to reduce the interest rate on the mortgage loan. Each discount point typically costs 1% of the loan amount.

In this case, the house is being bought for $150,000 and the borrower is providing a down payment of 10%, which is $15,000. The remaining balance of the loan is $135,000. If the borrower pays two discount points, the total cost of the points would be 2% of $135,000, which is $2,700.