Florida Real Estate Sales Associate Examination Content OutlineReal Estate MathMedium
A buyer is obtaining a new loan for $300,000 at an interest rate of 4.5% for 30 years. The lender charges 2 discount points. How much will the buyer pay for these discount points at closing?
- A$6,000
- B$3,000
- C$4,500
- D$9,000
Show answer & explanationAnswer & explanation
Correct answer: A. $6,000
One discount point is equal to 1% of the loan amount. Therefore, 2 discount points on a $300,000 loan would be 2% of $300,000. Calculation: $300,000 * 0.02 = $6,000.
Why the other options are wrong
- B. This might be 1% of the loan amount, or an incorrect calculation.
- C. This could be an incorrect percentage or miscalculation of the points.
- D. This would be 3% of the loan amount, or an error in the number of points.
Discount Points
Fees paid to the lender at closing to reduce the interest rate on a loan. One point equals 1% of the loan amount.
- Paid upfront at closing.
- Reduces the interest rate over the loan term.
- Each point is 1% of the loan principal.
Memory trick: Closing Costs Clearly Cover Crucial Charges.