Question

Which of the following is not true about a loan discount point? a. A point is purchased at the time of closing. b. A point is purchased for 1% of the loan amount. c. A point reduces the interest rate by 1%. d. A point bought will reduce the monthly mortgage payment.

Answer 1

The answer to this question is letter a. A point is purchased at the time of closing. All choices (,A  point is purchased for 1% of the loanamount., A point reduces the interest rate by 1% and A point bought will reduce the monthly mortgage payment) are true. 

Answer 2

Answer:

Option (a)

Option (b)

Option (d)

Explanation:

Loan Discount Points:

Mortgage points or discount points are prepaid fees paid directly to the lender at the time of closing to reduce the rate of interest for future payments. For example, one point can lower the interest rate upto $\frac{1}{8}th$ to $\frac{1}{4}th$ of a percent, depending on the borrower. Furthermore, each point costs 1% of the total loan amount and purchasing it can lower your monthly mortgage payments.

From above information, is it evident that option (a), option (b) and option (d) are true for Loan Discount Points, while option (c) is incorrect.