A lender offers you a fixed-rate mortgage for $145,000 at 6% for 30 years,monthly payments,with 2.625 discount points.What is the APR for this loan?

Question

Quizplus · Accepted Answer

To find the APR for this loan, we need to take into account the interest rate, the number of payments, and the lender fees. The 2.625 discount points represent a fee of 2.625% of the loan amount, which is $145,000 x 0.02625 = $3,811.25. This fee is paid upfront and reduces the interest rate from 6% to 5.75%.

Using a financial calculator or an online tool, we can find that the monthly payment for this loan is $884.20. The total amount of payments over 30 years is $318,312, which includes $173,312 in interest and $3,811.25 in fees.

To calculate the APR, we need to solve for the interest rate that equates the present value of the payments to the loan amount minus the fees. Using a financial calculator or an online tool, we find that the APR is 6.25%. Therefore, the best choice is C.

A Lender Offers You a Fixed-Rate Mortgage for $145,000 at 6