California Real Estate Practice Exam

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Master the California Real Estate Exam with our comprehensive practice quiz. Get expert tips, detailed content review, and insider strategies to pass on your first try.

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What is the effect of a discount point on the effective yield a lender gets from a mortgage loan?

It decreases it
It raises it
It has no effect
It varies with the market

The correct answer is: It raises it

A discount point is an amount of money paid to the lender at closing in exchange for a lower interest rate on the mortgage loan. This option raises the effective yield for the lender because they will receive more money over the life of the loan with a lower interest rate. Option A is incorrect because a discount point does not decrease the effective yield for the lender. Option C is incorrect because a discount point does have an effect on the lender's yield. Option D is incorrect because while the cost of a discount point may vary with the market, its effect on the lender's yield remains the same.