馃攳
Real Estate Math Video #2 - Calculating Discount Points | Real Estate Exam Prep - YouTube
Channel: The Real Estate Classroom
[0]
hi everyone my name is paul vachesky and
[2]
welcome to the real estate classroom
[4]
youtube channel in today's real estate
[6]
math video we're going to discuss
[8]
discount points what they are and how
[11]
you calculate them
[12]
all of that in this video
[19]
[Music]
[21]
so in today's real estate math video
[24]
we're going to discuss
[25]
what's called discount points now a
[28]
discount point is very important to
[30]
understand
[31]
with regards to the financing of the
[34]
loan so it's important real estate
[35]
agents
[36]
understand what a discount point is and
[38]
how it's calculated or how they are
[41]
calculated
[42]
but before we get to that do me a favor
[43]
give this video a thumbs up hit that red
[45]
subscribe button click on the
[47]
notification bell
[48]
and comments and questions down below i
[50]
would appreciate it
[51]
all right so calculating discount points
[54]
now
[54]
a discount point is a fee that the
[57]
lender charges that's paid directly to
[60]
the lender
[61]
at closing in exchange for a reduced
[65]
interest rate so the buyer can pay the
[68]
lender so much money to reduce that
[71]
interest rate which obviously will save
[73]
them a ton of money over a 30-year
[75]
mortgage we call that in the industry
[78]
buying down the interest rate that's
[80]
that's what we call it now
[81]
it's important to understand for the
[82]
calculation purpose
[85]
that one discount point is equal to one
[88]
percent of the amount that's borrowed
[91]
so if if the buyer is going to go and
[94]
get a hundred thousand dollar mortgage
[96]
uh each discount point is going to one
[99]
thousand dollars that's one thousand
[101]
dollars per point
[102]
that that buyer's gonna pay that uh that
[106]
lender to buy down the rate now
[107]
typically
[109]
for every discount point that the buyer
[111]
pays
[112]
it reduces the interest rate by
[115]
one-eighth of one percent
[118]
i know that doesn't sound like a lot but
[120]
when you calculate that over a 30-year
[123]
loan
[123]
in the end it can be very substantial
[126]
right so let's do a couple of
[128]
practice test questions that you might
[130]
actually see on your real estate exam
[133]
practice question number one this is
[135]
pretty straightforward and it's
[137]
in its rawest form a home buyer is
[139]
obtaining a hundred thousand dollar
[141]
mortgage
[142]
she will pay three discount points to
[144]
lower her interest rate
[146]
what was the amount charged for her
[149]
discount points at
[150]
closing a couple of key numbers you have
[153]
to know number one she's getting a
[155]
hundred thousand dollar
[157]
mortgage that means her loan amount is a
[159]
hundred thousand
[160]
and she will pay three discount points
[162]
remember one discount point is equal to
[165]
one percent of the amount that's
[167]
borrowed
[167]
so the formula as you can see on your
[169]
screen is really simple it's
[171]
one hundred thousand dollars times
[173]
decimal zero
[174]
three or if you have a a calculator that
[178]
has a percent key you could take one
[180]
hundred thousand
[181]
times three hit the percent key either
[184]
way that'll give you your final answer
[187]
of
[187]
three thousand dollars so the answer to
[190]
the question what was the amount charged
[191]
for her discount points at closing
[194]
the answer is three thousand dollars
[197]
now let's take a look at another
[199]
practice question where the question is
[201]
phrased a little bit different
[203]
tom purchased a home using an fha
[205]
mortgage
[206]
for 200 000 the amount financed
[211]
will be a hundred and fifty thousand
[213]
dollars with the lender charging
[215]
three discount points what amount did
[217]
the lender charge for discount points so
[220]
they threw in that little extra sentence
[222]
that first sentence there
[224]
so how do we calculate it number two or
[226]
uh for
[227]
question number two the two key numbers
[230]
we have to know
[231]
is a hundred and fifty thousand and
[235]
three notice tom purchased the home
[237]
using an fha mortgage for two hundred
[239]
thousand dollars but at this point
[242]
we don't have to do we don't have to
[243]
worry about that because we already know
[245]
because the test question told us
[247]
how much the financing will be so
[250]
they're going to finance
[251]
or tom's going to get a thousand 150
[253]
loan
[254]
he's going to buy down the interest rate
[256]
so the lender's charging three discount
[258]
points so
[260]
so the final answer is or the
[261]
calculation we take a hundred and fifty
[264]
thousand dollars remember that's the
[265]
amount financed
[266]
we multiply that by decimal zero three
[269]
again or we can just take a hundred and
[271]
fifty thousand
[272]
times three hit the percent key and the
[275]
answer to this question
[277]
is tom will pay four thousand five
[279]
hundred dollars
[281]
in discount points to lower his interest
[284]
rate
[285]
and then finally uh practice test
[288]
question number three
[290]
tom purchases one two three main street
[292]
for two hundred thousand
[294]
the loan to value ratio is 70 percent
[298]
and the lender is charging four discount
[300]
points
[301]
on this loan how much in discount points
[303]
will tom pay
[304]
his lender so there's a term in there
[307]
called
[307]
a loan to value ratio i'm not going to
[311]
get into the
[312]
you know the details of that i already
[313]
did a video on loan to value
[317]
uh you might want to pause this video
[319]
and go check out this video
[321]
link in the upper right hand corner that
[323]
discusses loan to value ratios but
[326]
for those of you that already know what
[327]
it is let's calculate
[330]
this particular math problem
[333]
so tom there are two two key numbers in
[336]
here
[336]
that we have to know or we're dealing
[338]
with to start out this is a two-step
[341]
process anytime we're calculating a loan
[343]
to value so
[344]
tom purchased one two three main street
[346]
for two hundred thousand that is the
[348]
purchase price
[349]
so we have to figure out what the loan
[352]
amount is and we figure that out by
[354]
taking 200
[355]
000 and we multiply it by decimal
[358]
70 because that is the loan to value
[362]
again we can take 200 000 and multiply
[365]
it by 70
[366]
hit the percent key and it gives us the
[368]
same answer that means in step
[370]
one calculating the finance amount
[374]
tom is going to finance a hundred and
[376]
forty thousand
[377]
so that's step one calculating the loan
[381]
amount
[381]
we take the purchase price we multiply
[384]
it by 70 percent which is the loan to
[386]
value ratio
[388]
that gives us a financing amount of 140.
[392]
step two we take that hundred and forty
[394]
thousand dollars
[396]
we multiply it by point zero four
[399]
because remember there are four
[401]
discount points uh four discount points
[404]
being charged here
[406]
so we take a hundred and forty thousand
[409]
we multiply it by decimal zero four or
[412]
again we can take a hundred forty
[413]
thousand
[413]
multiply it by four hit the percent key
[417]
and tom is going to pay a total of five
[419]
thousand six hundred dollars
[421]
in discount points so those are the
[425]
three most
[425]
common formatted questions you're
[427]
probably going to see
[429]
on your real estate licensing exam
[431]
regarding calculations of discount
[433]
points
[434]
if you're going to continue studying
[435]
real estate math check out this video
[438]
right here
[438]
if you haven't subscribed to the channel
[440]
i would beg you to please do so click
[442]
the little circle to my left
[444]
comments questions down below it's been
[446]
an honor having you here for this video
[448]
i'll see you in the next real estate map
[451]
video
Most Recent Videos:
You can go back to the homepage right here: Homepage