Question

In order to make the monthly mortgage payment on a new house affordable, Kolton will need to obtain a lower mortgage interest rate. Kolton’s bank has offered to reduce the rate of his mortgage from 5.10% to 4.20% if he pays one point at closing. If the amount of the mortgage is $490000, how much must Kolton pay to reduce his interest rate?

Answer 1

$4900

Step-by-step explanation:

One point is money aid to lender at closing in negotiation for a lower interest rate . It is calculated as 1% of the mortgage amount or $100 for every $100,000 borrowed

Workings

Mortgage value = $490,000

1% of mortgage value = 1/100*490000

= $4,900