Question

Borrower A must pay 21/2 points to secure a mortgage at the rate he wants. The value of the property is $390,000 and the LTV is 80%. How much does he owe the bank in points?

Answer 1

Borrower A owes the bank a total of $24,375 in points.

Step-by-step explanation:

To calculate the amount Borrower A owes the bank in points, we need to first calculate the value of the points.

The value of 1 point can be found by multiplying the loan amount by the value of each point. In this case, Borrower A must pay 2.5% of the mortgage as points, which is equal to 0.025.

So, the value of each point is $390,000 x 0.025 = $9,750.

To calculate the total amount owed in points, we multiply the value of each point by the number of points, which is 21/2 = 2.5.

Therefore, Borrower A owes the bank a total of $9,750 x 2.5 = $24,375 in points.