Question

On April 1, year 1, Mary borrowed $240,000 to refinance the original mortgage on her principal residence. Mary paid 3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. How much can Mary deduct in year 1 for her points paid?
a) $240.
b) $180.
c) $5,400.
d) $7,200.

Answer 1

Answer:

b) $180

Explanation:

The answer to this question is option d, below is how I came up with this solution.

Loan period = 30 years

Amount borrowed = $240,000

3 points = 3 percent = 0.03

$240,000 x 0.03 = $7,200

9/360 = 0.025

7200 x 0.025

= 180 dollars.

From these calculations above, Mary can deduct 180 dollars in year 1 for her points paid