New Jersey Real Estate Practice Exam Free Practice Question
A property sold for $150,000. The loan-to-value ratio was 80% and there were 2 discount points charged. Which of the following was the cost of the discount points?
Correct Answer: C
Rationale: To determine the cost of the discount points, first calculate the loan amount. With a property value of $150,000 and a loan-to-value ratio of 80%, the loan amount is $150,000 x 0.80 = $120,000. Discount points are typically calculated as a percentage of the loan amount, with each point equating to 1% of the loan. Thus, 2 discount points equal 2% of $120,000, which is $120,000 x 0.02 = $2,400.
- Option A ($600) miscalculates the percentage of the loan amount.
- Option B ($1,500) incorrectly applies the percentage or miscalculates the loan amount.
- Option D ($3,000) assumes a higher percentage than what was charged.
Thus, $2,400 accurately reflects the cost of the discount points.
Unlock All Questions
Subscribe to Premium for full access to all practice questions, detailed rationales, and performance tracking.
Subscribe Now