A loan of $60,000 with 2.5 discount points results in how much cash paid at closing?

A loan of $60,000 with 2.5 discount points results in how much cash paid at closing?

• A. $1,000
• B. $1,500
• C. $1,750
• D. $2,000

Answer: (B)

Discount points are prepaid interest paid at closing to lower the loan’s interest rate; each point costs 1% of the loan amount. With two and a half points on a sixty-thousand-dollar loan, you’re paying two and a half percent of sixty thousand. That calculation is sixty thousand dollars times two and a half percent, which equals one thousand five hundred dollars. So the cash paid at closing for the points is one thousand five hundred dollars.

Discount points are prepaid interest paid at closing to lower the loan’s interest rate; each point costs 1% of the loan amount. With two and a half points on a sixty-thousand-dollar loan, you’re paying two and a half percent of sixty thousand. That calculation is sixty thousand dollars times two and a half percent, which equals one thousand five hundred dollars. So the cash paid at closing for the points is one thousand five hundred dollars.