Texas real estate exam discount points calculator, with the cost and the lender-yield rule built in.
Find the dollar cost of points as 1% of the loan, and how many points raise the lender's yield using the 1/8-of-1%-per-point exam rule.
One point equals 1% of the loan amount. Multiply the loan by the number of points, then by 1%, to get the cost. Each discount point typically raises the lender's yield by about 1/8 of 1%, so 4 points raise the yield about half a percent.
A point is 1% of the loan amount, not the purchase price or the down payment.
Multiply the loan amount by the number of points, then by 1%.
Discount points lower the borrower's rate and raise the lender's yield.
The exam convention is that each discount point raises the lender's yield by about 0.125%.
Divide the yield gap by the yield increase per point to find how many points are needed.
Origination points pay for making the loan and do not move the yield like discount points.
Find the cost of points and the lender yield they buy.
Use cost of points when you know how many points. Use the yield mode when the question gives a note rate and a desired yield.
One point equals 1% of the LOAN amount, not the sale price or the down payment. Use the loan amount as the base.
Each discount point typically raises the lender's yield by about 1/8 of 1% (0.125%). Points buy down the rate for the borrower and raise the yield for the lender.
Origination points are a fee for making the loan and do not change the yield the way discount points do. Read which type the question means.
Points are based on the loan amount, not the purchase price. And the 1/8-of-1%-per-point yield rule is the standard exam convention; the question may state a different yield-per-point value, so use what the stem gives.
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Where do discount-points questions go wrong?
The math is one multiplication. The misses come from the wrong base, the wrong point type, or the yield-per-point rule.
Is the base the loan amount or the price?
Points are always 1% of the loan amount. Do not calculate points on the purchase price or the down payment.
Are these discount points or origination points?
Discount points buy down the rate and raise the lender's yield. Origination points are a fee for making the loan. Read which type the stem means.
Does the question give a yield-per-point value?
The standard exam rule is about 1/8 of 1% (0.125%) of yield per discount point. If the question states a different value, use that.
Are you solving for cost or for points?
Use cost mode when you know the number of points. Use the yield mode when you have a note rate and a target lender yield.
Four discount-points patterns to know cold.
These cover cost of points, points for a target yield, single and fractional points.
$200,000 loan, 4 discount points
One point is 1% of the loan, so 4 points is 4%.
6.5% note rate, 7.0% target yield, 1/8% per point
Divide the yield gap by the yield increase per point.
$325,000 loan, 1 point
A point is 1% of the loan, not a flat $1,000.
$180,000 loan, 1.5 points
Points can be fractional; do not round to a whole point.
The discount-points mistakes that cost easy points.
Points reward a clean definition. Run these checkpoints before you trust the number.
Calculating points on the purchase price
Points are 1% of the loan amount. Using the price or the down payment as the base gives the wrong cost.
Confusing discount points with origination points
Discount points buy down the rate and raise the lender's yield. Origination points are a fee. Read the stem.
Assuming a yield-per-point value
The 1/8-of-1% rule is the standard convention, but use the value the question gives if it states one.
Treating one point as $1,000
A point is a percentage of the loan, not a fixed dollar amount. On a $300,000 loan, one point is $3,000.
Forcing points to whole numbers
Points can be fractional, such as 0.5 or 1.5. Keep the fraction unless the question rounds.
What to study next with discount points.
Points sit inside financing and closing math. Pair them with the payment, loan-to-value, and the mixed closing worksheet.
How do you calculate discount points on the Texas real estate exam?+
One point equals 1% of the loan amount. Multiply the loan amount by the number of points, then by 1%. For example, 4 points on a $200,000 loan is 200,000 x 4 x 0.01, or $8,000.
How much does one discount point raise the lender's yield?+
The standard exam convention is that each discount point raises the lender's yield by about 1/8 of 1%, or 0.125%. To raise the yield by half a percent, a lender would charge about 4 points. If the question gives a different value, use that.
What is the difference between discount points and origination points?+
Discount points are prepaid interest that buy down the borrower's rate and raise the lender's yield. Origination points are a fee charged for making the loan. Both are quoted as a percent of the loan, but only discount points buy down the rate.
Are points calculated on the loan or the purchase price?+
Points are always a percent of the loan amount, not the purchase price or the down payment. Using the wrong base is the most common discount-points miss.
Is this discount points calculator for a real loan?+
No. It is built for Texas real estate exam preparation. Real loan pricing uses lender rate sheets, pricing adjustments, and disclosures such as the Loan Estimate.
A lender wants a 7% yield on a loan with a 6.5% note rate. If each point raises the yield 1/8 of 1%, how many points are charged?
Yield gap: 7.0% - 6.5% = 0.5%. Points: 0.5 / 0.125 = 4 discount points. On a $200,000 loan, that is $8,000.