85. An owner bought a house for $65,000 and put up $13,000 in cash as a down payment. The owner received a conventional first mortgage loan from a bank and trust that charged the owner 3 points as a service charge for making the loan. What amount will the owner have to pay as the service charge
Answer: B
The owner will have to pay $1,560 as the service charge.
To calculate the service charge, we need to determine the total amount of the loan. Since the house cost $65,000 and the owner made a down payment of $13,000, the loan amount is $65,000 - $13,000 = $52,000. The service charge is calculated at 3 points, which is 3% of the loan amount, resulting in $52,000 * 0.03 = $1,560.
A) $390
Option A is incorrect because it represents 0.75% of the total loan amount. The service charge is 3% of the loan amount, and $390 does not reflect this percentage based on the calculated loan of $52,000.
B) $1,560
Option B is correct as it accurately represents the service charge of 3 points on the $52,000 loan amount. The calculation was done as follows: $52,000 * 0.03 = $1,560, confirming that this is the correct service charge.
C) $1,950
Option C is incorrect because it suggests a service charge equal to 3.75% of the loan amount. The correct service charge, based on 3 points (3%), does not match this figure, indicating a miscalculation of the percentage.
D) $3,000
Option D is also incorrect as it implies a service charge of approximately 5.77% of the total loan amount. This significantly exceeds the 3 points that were charged, making it an inaccurate representation of the service charge.
Conclusion
The correct answer is $1,560, which is derived from applying the correct percentage of 3 points to the loan amount of $52,000. All other options either miscalculate the percentage or present figures that do not align with the service charge based on the provided loan details. This highlights the importance of accurately calculating percentage-based charges in financial transactions.