Discount Points and Loan Charges for the New York Exam

That distinction is the center of this lesson. A clean calculation starts by identifying the correct base, then asks whether the item is a discount point, another loan charge, a lender credit or a different closing cost.

What is the formula for discount points?

Use:

Cost of points = Loan amount × Point percentage

One point is 1% of the loan amount:

1 point = 0.01 × Loan amount

Convert the number of points to a percentage and decimal before multiplying.

The Consumer Financial Protection Bureau confirms that one point equals 1% of the loan amount. A fraction of a point uses the same relationship.

Official source map

The New York State Department of State 77-hour curriculum includes points in Subject 10, Real Estate Mathematics. It also lists discount points under Real Estate Finance and covers closing costs and adjustments in the title and closing subject.

The Department of State salesperson page says the multiple-choice examination is based on the curriculum and allows 1 1/2 hours after instructions. The Department does not publish an official count or percentage of questions devoted to points or other finance math.

The CFPB's Loan Estimate explainer defines points as an upfront fee paid to the lender in exchange for a lower interest rate than the borrower otherwise would have received. It identifies origination charges as upfront lender fees and explains where lender credits and estimated cash to close appear.

Federal Regulation Z requires points paid to reduce the interest rate to be disclosed as both a percentage of the amount of credit extended and a dollar amount. The official Loan Estimate rule and interpretation also distinguishes those points from other origination charges.

What are discount points?

Discount points are upfront charges connected to receiving a lower interest rate. They create a tradeoff:

• the borrower pays more at closing
• the borrower receives a lower rate than the comparable zero-point option from that lender
• the value of the rate reduction depends on the lender, loan and market conditions

The cost relationship is fixed: one point costs 1% of the loan amount. The rate change is not fixed. The CFPB's research on discount points states that discount points have no fixed value in terms of the interest-rate change.

Do not memorize a claim such as “one point lowers the rate by 0.25%.” A particular lender could offer that tradeoff in a particular scenario, but it is not the definition of one point.

How do you calculate the cost of one point?

Example 1: One point

A borrower obtains a $360,000 loan and pays one point.

$360,000 × 0.01 = $3,600

One point costs $3,600.

The loan amount is the base. The property's purchase price does not replace it.

Example 2: Fractional points

A borrower pays 0.75 point on a $520,000 loan.

0.75% = 0.0075

$520,000 × 0.0075 = $3,900

The points cost $3,900.

Example 3: More than one point

A $285,000 loan includes 2.25 discount points.

2.25% = 0.0225

$285,000 × 0.0225 = $6,412.50

The points cost $6,412.50.

Why is the loan amount the base?

A point is defined as a percentage of the loan amount. Purchase price, appraised value, down payment and loan amount can all be different.

Example 4: Find the loan first

A property sells for $600,000. The borrower makes a 20% down payment and finances the remainder. The borrower then pays 1.5 points on the loan. Assume no other amount is financed.

First calculate the down payment:

$600,000 × 0.20 = $120,000

Then calculate the loan amount:

$600,000 - $120,000 = $480,000

Then calculate points:

$480,000 × 0.015 = $7,200

The points cost $7,200. Multiplying $600,000 by 1.5% would incorrectly use the purchase price as the base.

For a full review of base, rate and part, see Part, Rate and Whole for New York Real Estate Math.

How do you find the loan amount from the dollar cost of points?

Rearrange the relationship:

Loan amount = Cost of points ÷ Point percentage

Example 5: Solve for the loan

A borrower pays $5,250 for 1.5 points. What is the loan amount?

Loan amount = $5,250 ÷ 0.015

Loan amount = $350,000

Check:

$350,000 × 0.015 = $5,250

How do you find the number of points?

Use:

Point rate = Cost of points ÷ Loan amount

Convert the decimal result to a percentage. The percentage number is also the number of points.

Example 6: Solve for points

A borrower pays $4,800 in points on a $320,000 loan.

$4,800 ÷ $320,000 = 0.015

0.015 = 1.5%

The borrower paid 1.5 points.

Are all percentage-based loan fees discount points?

No. A lender or loan originator may charge other fees for making and processing the loan. The CFPB explains that an origination fee is a lender charge for making the mortgage loan.

The Loan Estimate's Origination Charges section can include discount points and other items. Regulation Z's official interpretation gives examples such as application, origination, underwriting, processing, verification and rate-lock fees. Only the points identified as paid to reduce the interest rate carry that specific disclosure meaning.

In an educational calculation, a separate origination charge might be:

• a stated flat dollar amount
• a stated percentage of the loan amount
• one item in a list of charges to total

Use the facts supplied. Do not label every fee “points” simply because it is expressed as a percentage.

How do you calculate an origination charge?

If a problem states that an origination charge is a percentage of the loan amount, use:

Origination charge = Loan amount × Stated charge rate

Example 7: Percentage charge plus a flat fee

A $450,000 loan has a stated 0.8% origination charge and a separate $650 processing fee. What is the total of those two charges?

Origination charge = $450,000 × 0.008 = $3,600

Combined stated charges = $3,600 + $650 = $4,250

The combined amount is $4,250.

This does not establish the borrower's complete closing costs. It totals only the two items in the problem.

What are lender credits?

The CFPB explains that lender credits generally work in the reverse direction from discount points. The lender provides a credit that offsets closing costs, and the borrower accepts a higher interest rate than the comparable option without the credit.

The cost effect is different:

• discount points increase upfront costs in exchange for a lower rate
• lender credits reduce upfront costs in exchange for a higher rate

On the Loan Estimate, total lender credits appear in Section J as a negative number because they reduce the amount of closing costs. They are not a down payment and do not automatically reduce the loan principal.

Some industry worksheets describe lender credits as negative points. For exam preparation, follow the term and sign the problem supplies. If a credit is stated as a percentage of the loan amount, calculate its dollar value with the same percentage relationship, then subtract it where the problem directs.

Example 8: Stated lender credit

A lender offers a 0.625% credit on a $400,000 loan. What is the credit amount?

$400,000 × 0.00625 = $2,500

The lender credit is $2,500.

If a separate problem says $11,200 in closing costs are reduced by that credit:

$11,200 - $2,500 = $8,700

The remaining stated closing costs would be $8,700 before any other credits or adjustments.

Is a lender credit the same as a seller credit?

No. A lender credit comes from the lender and can be connected to loan pricing. A seller credit is an amount the seller agrees to contribute under the transaction terms, subject to the loan program and applicable rules.

The CFPB's Closing Disclosure explainer shows lender credits and seller credits in different places. Keep the source and purpose of each credit clear. A math problem may ask you to subtract both, but they remain separate items.

Are points the same as closing costs?

Points can be part of closing costs, but closing costs are broader. The CFPB identifies categories such as:

• origination charges
• services the borrower cannot shop for
• services the borrower can shop for
• taxes and other government fees
• prepaids
• initial escrow payment
• other transaction costs

Avoid using “points,” “loan costs,” “closing costs” and “cash to close” as synonyms.

The Closing Disclosure explainer defines total closing costs as upfront costs associated with the loan and transaction, excluding the down payment. Cash to close is a separate calculation that can include down payment, closing costs, deposits, credits and adjustments.

Are points the same as prepaid interest?

No. Discount points are upfront fees paid for a lower interest rate. Prepaid interest covers interest that accrues for a specified period, often between closing and the beginning of the regular payment cycle.

If a problem asks for prepaid interest, use the interest facts and day-count instruction it provides. If it asks for discount points, use the loan amount and point rate. Review Simple Interest for the New York Real Estate Exam for principal, rate and time calculations.

Are points the same as APR?

No. The CFPB explains that an interest rate and APR measure different things. The interest rate is the yearly cost of borrowing expressed as a rate, without fees and other charges. APR is a broader measure that can include the interest rate, points, mortgage broker fees and certain other charges.

A point is a dollar cost equal to a percentage of the loan amount. APR is a disclosed rate measure. Do not add points directly to the interest rate or APR unless a complete problem gives a valid method for doing so.

How do you calculate a simple points break-even period?

If a problem gives both the points cost and monthly payment savings, a simple educational break-even calculation is:

Break-even months = Upfront points cost ÷ Monthly payment savings

Example 9: Stated monthly savings

A borrower pays $4,500 in discount points. The problem states that the lower-rate option saves $75 per month compared with the specified zero-point option.

$4,500 ÷ $75 = 60 months

The simple break-even period is 60 months, or five years.

This calculation compares the two stated amounts only. A real decision can also depend on how long the borrower keeps the loan, refinancing, investment returns, tax treatment, changing expenses and the complete terms of each offer. The CFPB recommends comparing options across time periods rather than assuming points are better or worse for every borrower.

How should two loan offers be compared?

Do not compare only the interest rate or only the points. The CFPB's loan-offer comparison guide directs consumers to compare monthly payment, upfront loan costs, lender credits and cash to close, among other terms.

For an exam-style scenario, make a small comparison table from the supplied facts:

Avoid inferring that the offer with fewer points has the lower total cost. Avoid inferring that the offer with the lower rate has the lower upfront cost. The question's figures determine the answer.

What are the common mistakes with points and loan charges?

Multiplying by purchase price

Points use the loan amount. Calculate the loan first when only price and down payment are given.

Treating one point as one dollar

One point is 1% of the loan amount, so its dollar value changes with the size of the loan.

Entering 1.5 instead of 0.015

One and one-half points means 1.5%, which is 0.015 for multiplication.

Assuming a fixed rate reduction

One point has a fixed dollar definition but no fixed interest-rate effect.

Calling every origination charge a discount point

Discount points are tied to reducing the interest rate. Other origination charges pay for making or processing the loan.

Adding a credit instead of subtracting it

A lender credit reduces the stated upfront costs. Follow the signs and directions in the problem.

Confusing closing costs with cash to close

Cash to close can include the down payment and reflect deposits, credits and adjustments. It is not simply another name for closing costs.

Using APR as the point rate

APR is a broader cost measure. It is not the number of discount points.

What is a reliable exam-day workflow?

Use this sequence:

1. Identify the quantity requested.
2. Find or calculate the loan amount.
3. Convert points or any stated percentage charge to a decimal.
4. Calculate each charge separately.
5. Apply credits with the correct sign.
6. Total only the items the question includes.
7. Estimate and check whether the result is reasonable.

Quick estimate: one point on $500,000 is $5,000. Therefore, 0.5 point should be $2,500 and two points should be $10,000. Use this mental anchor to catch misplaced decimals.

The New York real estate math formula map connects point calculations with percentages, interest, commissions, taxes and closing math.

Can you solve these original practice questions?

Practice 1

What is the cost of 1.25 discount points on a $440,000 loan?

A. $4,400
B. $5,500
C. $6,600
D. $55,000

Answer: B. 1.25% = 0.0125. The cost is $440,000 × 0.0125 = $5,500.

Practice 2

A property costs $750,000. The borrower makes a $150,000 down payment and pays two points on the loan. What is the cost of the points?

A. $12,000
B. $15,000
C. $18,000
D. $30,000

Answer: A. The loan is $750,000 - $150,000 = $600,000. Two points cost $600,000 × 0.02 = $12,000.

Practice 3

A borrower pays $3,937.50 for 0.75 point. What is the loan amount?

A. $295,312.50
B. $393,750
C. $525,000
D. $750,000

Answer: C. $3,937.50 ÷ 0.0075 = $525,000.

Practice 4

A $360,000 loan includes $6,300 in discount points. How many points were paid?

A. 0.75 point
B. 1.25 points
C. 1.5 points
D. 1.75 points

Answer: D. $6,300 ÷ $360,000 = 0.0175, or 1.75% of the loan amount. That equals 1.75 points.

Practice 5

A $500,000 loan has a stated 0.6% origination charge and a separate $900 underwriting fee. What is the combined amount of those two charges?

A. $3,000
B. $3,500
C. $3,900
D. $5,900

Answer: C. The percentage charge is $500,000 × 0.006 = $3,000. Add $900 for a combined amount of $3,900.

Practice 6

A stated lender credit equals 0.5% of a $480,000 loan. What is the credit amount?

A. $1,200
B. $2,400
C. $4,800
D. $24,000

Answer: B. $480,000 × 0.005 = $2,400.

Practice 7

A borrower pays $6,240 in points and the problem states that the selected rate saves $80 per month compared with the specified zero-point offer. What is the simple break-even period?

A. 52 months
B. 65 months
C. 72 months
D. 78 months

Answer: D. $6,240 ÷ $80 = 78 months.

Practice 8

Which statement is accurate?

A. One point lowers every mortgage rate by the same amount.
B. One point equals 1% of the property's purchase price.
C. Discount points are an upfront charge tied to a lower interest rate.
D. Lender credits and seller credits are the same item.

Answer: C. The cost of one point is 1% of the loan amount, its rate effect varies, and lender and seller credits come from different parties.

Frequently asked questions

How much is one point on a mortgage?

One point costs 1% of the loan amount. One point on $300,000 costs $3,000; one point on $500,000 costs $5,000.

Does one point reduce the interest rate by 1%?

No. One point describes an upfront cost equal to 1% of the loan amount. The interest-rate reduction depends on the lender, loan and market.

Are points calculated from purchase price or loan amount?

Use the loan amount. If the question gives price and down payment, calculate the financed amount before calculating points.

Are discount points and origination fees the same?

No. Discount points are paid for a lower interest rate. An origination fee is a lender charge for making the loan. Both can appear under origination charges.

What is the difference between points and lender credits?

Points increase upfront cost in exchange for a lower rate. Lender credits reduce upfront costs and are generally connected to accepting a higher rate.

Are points included in APR?

APR can reflect points and certain other charges, but APR is a disclosed rate measure, not the dollar cost or count of points.

How many points questions are on the New York exam?

The Department of State curriculum includes points, but the Department does not publish an official question count or subject weighting for this topic.

Sources and verification notes

This article was checked against official materials available on August 27, 2026. Its scenarios and practice questions are original and do not reproduce state examination items or loan offers.

• New York State Department of State, Real Estate Salesperson 77-Hour Curriculum
• New York State Department of State, Real Estate Salesperson
• Consumer Financial Protection Bureau, Lender credits and points
• Consumer Financial Protection Bureau, Loan Estimate explainer
• Consumer Financial Protection Bureau, Regulation Z section 1026.37
• Consumer Financial Protection Bureau, Trends in discount points
• Consumer Financial Protection Bureau, Mortgage origination fees
• Consumer Financial Protection Bureau, Closing Disclosure explainer
• Consumer Financial Protection Bureau, Mortgage interest rate versus APR
• Consumer Financial Protection Bureau, Compare loan offers

Use this lesson for exam preparation and financial education. For an actual mortgage, compare the lender's Loan Estimates, review the Closing Disclosure and ask qualified lending, legal or tax professionals about the transaction and personal consequences.