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Points & Interest formula

Discount Points Formula

cost of points = loan amount × (points ÷ 100)

Discount Points

cost of points = loan amount × (points ÷ 100)
  • loan amount — The amount being borrowed, not the purchase price
  • points — Number of discount points, each equal to 1% of the loan

Worked example: A $280,000 loan with 2 discount points.

  1. 2 ÷ 100 = 0.02
  2. $280,000 × 0.02 = $5,600

$5,600 to buy down the rate

Other Points & Interest formulas

Discount Points practice questions

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

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