Question

MR. GREEN WISHES TO PURCHASE A HOUSE SELLING FOR $125,000 THE BANK REQUIRES A 20 % DOWN PAYMENT AND A PAYMENT OF TWO POINTS AT THE TIME OF CLOSING. WHAT IS THE COST OF THE TWO POINTS OF THE MORGAGE?

Answer 1

From the information given,

selling price of house = 125000

down payment = 20%

Thus,

down payment = 20/100 x 125000 = 25000

Loan amount or mortgage = selling price - down payment = 125000 - 25000

mortgage = 100000

1 mortgage point is 1% of the mortgage amount

2 mortgage points is 2% of the mortgage amount = 2/100 x 100000 = 2000

Thus,

cost of the two points of the mortgage = $2000