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Financing term

Discount Points

Prepaid interest, each point equal to 1% of the loan amount, paid to reduce the interest rate.

Why Discount Points matters on the exam

This term belongs to Financing. The questions below are real items from Freehold's bank that use it - each one cites its source.

Exam questions using Discount Points

Every Freehold question shows why the right answer is right — and cites its source.

A $310,000 loan carries 2 discount points. What is the cost of the points?

  1. $620
  2. $9,300
  3. $6,200
  4. $12,400
Show answer & explanation

$6,200 — Each point costs 1% of the loan amount: $310,000 × 2 ÷ 100 = $6,200.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A buyer's loan amount is $268,500 and the lender charges 3.5 discount points. What is the total cost of the points?

  1. $9,397.50
  2. $939.75
  3. $4,698.75
  4. $6,712.50
Show answer & explanation

$9,397.50 — 3.5 points equal 3.5% of the loan: $268,500 × 3.5 ÷ 100 = $9,397.50.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A borrower pays $8,400 in discount points on a $280,000 loan. How many points did the lender charge?

  1. 4.5 points
  2. 3.0 points
  3. 3.1 points
  4. 6.0 points
Show answer & explanation

3.0 points — Each point is 1% of the loan, so points = cost ÷ loan × 100: $8,400 ÷ $280,000 × 100 = 3.0 points.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

Related Financing terms

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