A "point" is 1% of your borrowed amount on a mortgage. you want to pay 2 points to get a 0.5% reduction in your interest rate on a $175,000 mortgage. how much will you pay in points? a) $3,500 b) $3,750 c) $4,100 d) $5,175
The answer is A) $3,500. If one point is one percent of the mortgage and the mortgage is for $175,000 then one point is equal to $1750. Since you want to pay two points to get the interest rate deduction, we would want to double that amount to $3500 ($1750 x 2= $3500).
