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27 Dec 2024, 16:49
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Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. The chart below shows three options for a qualified lender who wants to borrow $200,000 at a 30-year term from a local bank called First Lending.
$8,500
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
(hard)
Question Stats:
54% (03:19) correct
46%
(03:30)
wrong
based on 1237
sessions
History
Date
Time
Result
Not Attempted Yet
Which of the following represents the approximate total savings between a $200,000 loan by Susanne with 2 points and a $200,000 loan by Susanne with 1 point, assuming both loans go to term?
| $6,500 | |
| $7,000 | |
| $8,500 | |
| $10,500 | |
| $12,500 |
ShowHide Answer
Official Answer
$8,500
Home A: $327,500 with 1 point: No
Home B: $255,000 and 1 point: Yes
Home C: $259,000 and no points: No
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
95%
(hard)
Question Stats:
44% (02:13) correct
56%
(02:23)
wrong
based on 1218
sessions
History
Date
Time
Result
Not Attempted Yet
Based on the information presented, determine if Susanne will be able to purchase the following homes. Assume no other costs other than the down payment, the fixed closing cost, and points and no other sources of cash for the upfront costs other than the $10,000 and the down payment program. Select Yes if she could purchase the home with the price and points listed. Otherwise select No.
| Yes | No | |
| Home A: $327,500 with 1 point | ||
| Home B: $255,000 and 1 point | ||
| Home C: $259,000 and no points |
ShowHide Answer
Official Answer
Home A: $327,500 with 1 point: No
Home B: $255,000 and 1 point: Yes
Home C: $259,000 and no points: No
September 1, 2020: No
November 1, 2020: No
January 1, 2021: Yes
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
95%
(hard)
Question Stats:
36% (02:35) correct
64%
(02:22)
wrong
based on 1001
sessions
History
Date
Time
Result
Not Attempted Yet
In the table below, three early payoff dates are given for a $200,000 loan by Susanne from First Lending with 2 points purchased that originated on March 1, 2015. Click Yes if the loan at that payoff date would involve less total cost than the same loan with no points purchased. Otherwise select No.
| Yes | No | |
| September 1, 2020 | ||
| November 1, 2020 | ||
| January 1, 2021 |
ShowHide Answer
Official Answer
September 1, 2020: No
November 1, 2020: No
January 1, 2021: Yes
Attachment:
13.jpg [ 20.18 KiB | Viewed 11496 times ]
28 Dec 2024, 19:00
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Question 1.
1. To find the total cost difference between the two loans, we have to look at what is different between the two.
2. The 2 point loan costs $2000 more for the extra point and also costs $29.05 less for each monthly payment.
3. Now, let's put this info together with the knowledge that Susanne pays for 30 years or 360 months: Cost of 1 point loan - Cost of 2 point loan = \(-\$2000 + \$29.05 * 360 = \$8458\), which is closest to the answer $8,500.
Question 2.
1. Let's consider each home and check whether it's possible for her to buy.
2. Home A: $327,500 with 1 point. The down payment is \(0.2 * \$327500 = \$65500\). The 1 point and closing cost are $2000 and $2500, respectively. Together, it would be \(\$65500 + \$2000 + \$2500 = \$70000\). She use the $60000 on the down payment and $10000 in cash for the remainder and other costs. The remaining sum for the house would be \(0.8 * \$327500 = \$262000\). With no other methods of payment, this cost would be above the $200000 cap on the loan. So, this house doesn't work.
3. Home B: $255,000 and 1 point. The down payment would be \(0.2 * \$255000 = \$51000\) and Susanne could use the bonus $60000 to cover it up. She then can use $4500 of her $10000 for the 1 point and closing cost and it leaves her with $5500. The remaining sum for the house is \(0.8 * 255000 = 204000\) and Susanne can use the rest of her money to bring it below $200000, making it possible to cover all costs. So, this house is possible.
4. Home C: $259,000 and no points. The monthly payment would be $1013.37, which is more than $1000. Susanne wants to keep this number under $1000. So, this house doesn't work.
Question 3.
1. The difference between the two loan plans is the cost for points (a difference of $4000) and the monthly payment (a difference of $58.54 per month). "Yes" means that \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan < 0\) and "No" if otherwise.
2. September 1, 2020. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 66 * \$58.54 = \$136.36 > 0\). No.
3. November 1, 2020. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 68 * \$58.54 = \$19.28 > 0\). No.
4. January 1, 2021. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 70 * \$58.54 = -\$97.8 < 0\). Yes.
1. To find the total cost difference between the two loans, we have to look at what is different between the two.
2. The 2 point loan costs $2000 more for the extra point and also costs $29.05 less for each monthly payment.
3. Now, let's put this info together with the knowledge that Susanne pays for 30 years or 360 months: Cost of 1 point loan - Cost of 2 point loan = \(-\$2000 + \$29.05 * 360 = \$8458\), which is closest to the answer $8,500.
Question 2.
1. Let's consider each home and check whether it's possible for her to buy.
2. Home A: $327,500 with 1 point. The down payment is \(0.2 * \$327500 = \$65500\). The 1 point and closing cost are $2000 and $2500, respectively. Together, it would be \(\$65500 + \$2000 + \$2500 = \$70000\). She use the $60000 on the down payment and $10000 in cash for the remainder and other costs. The remaining sum for the house would be \(0.8 * \$327500 = \$262000\). With no other methods of payment, this cost would be above the $200000 cap on the loan. So, this house doesn't work.
3. Home B: $255,000 and 1 point. The down payment would be \(0.2 * \$255000 = \$51000\) and Susanne could use the bonus $60000 to cover it up. She then can use $4500 of her $10000 for the 1 point and closing cost and it leaves her with $5500. The remaining sum for the house is \(0.8 * 255000 = 204000\) and Susanne can use the rest of her money to bring it below $200000, making it possible to cover all costs. So, this house is possible.
4. Home C: $259,000 and no points. The monthly payment would be $1013.37, which is more than $1000. Susanne wants to keep this number under $1000. So, this house doesn't work.
Question 3.
1. The difference between the two loan plans is the cost for points (a difference of $4000) and the monthly payment (a difference of $58.54 per month). "Yes" means that \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan < 0\) and "No" if otherwise.
2. September 1, 2020. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 66 * \$58.54 = \$136.36 > 0\). No.
3. November 1, 2020. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 68 * \$58.54 = \$19.28 > 0\). No.
4. January 1, 2021. \(Cost \ of \ 2 \ point \ loan - Cost \ of \ 0 \ point \ loan = \$4000 - 70 * \$58.54 = -\$97.8 < 0\). Yes.
General Discussion
05 Jan 2025, 00:53
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Bismuth83
Bismuth83 can you explain more on Question 3. I did not get of greater than or less than 0 is giving us the intended info
