A point is essentially prepaid interest and is 1% of the loan amount. If the borrower is obtaining a 90% LTV mortgage on a sales price of $125,000 and the bank charges 11/2 points, what amount will the borrower pay for the points? If the bank gives you a 75 percent loan-to-value ratio on a property valued at $225,000, how much additional cash will you owe at closing if you have already paid $10,000 in earnest money? Terminology and instructions: LTV - Loan to Value Points 1% of the mortgage amount NOTE: A mortgage will be based on the lower of the sales price or the appraisal. As an Example: Sale price is $60,000. Buyer obtaining a 90% LTV mortgage. $60,00090%=$54,000 mortgage. If bank charges 1 point, then $54,0001%= $540 for points. Please keep in mind that we start with 100%. If a buyer is obtaining a 90% LTV, that means that are getting a loan that is 90% of the total, leaving 10% as the buyer's down payment. So, a buyer obtaining an 85% LTV on a $100,000 property, will have a mortgage of $85,000 and a down payment of $15,000. $100,00085%=$85,000,$100,00015%=$15,000 As a check $85,000+$15,000=$100,000