Lola wants to make an 6% real return on a loan that she is planning to make, and the expected inflation rate during the period o
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Answer: Tom and Cindy paid 1.5 discount points.
House Value = $300,000.
Loan-to-Value Ratio (LTV) = 80%
Since LTV is 80%, the total loan (mortgage) value is :
In the real estate context, a point refers to one percent (1%) of the mortgage amount. There is no rule that these points should be in whole numbers.
We can find the number of points paid as follows:
There are two types of points:
- Discount Points: are actually pre-paid interest on the mortgage loan, and help in lowering the interest rate on the mortgage.
- Origination points : help in covering the costs incurred by the lender in processing the loan.