West Virginia Mortgage Law Test 2025 – 400 Free Practice Questions to Pass the Exam

In the context of mortgage lending, "points" refer to fees that borrowers pay to the lender at the time of closing, which are typically calculated as a percentage of the loan amount. These fees can serve various purposes, the most common of which is to buy down the interest rate on the loan. By paying points upfront, borrowers may secure a lower interest rate, which can result in lower monthly payments and reduce overall loan costs over time.

Points are often expressed in terms of a percentage of the loan amount—for example, one point is equivalent to 1% of the loan. This practice allows borrowers to invest more upfront to achieve long-term savings on interest payments.

Understanding how points work is essential for borrowers to make informed decisions regarding their financing options, as paying points can be advantageous in certain situations, particularly for those planning to stay in their home for a longer period.

The other options do not accurately describe points in the mortgage lending context. Points specifically relate to interest rate adjustments, whereas the other choices reference fees or taxes that do not align with the definition of points in mortgage transactions.