Which of the following terms reflects a lender's additional costs that are a percentage of the loan amount?

The correct answer is discount points. Discount points represent a form of prepaid interest on a loan where the borrower pays upfront fees to the lender in exchange for a reduced interest rate over the life of the loan. Each point typically costs 1% of the total loan amount. Borrowers often choose to pay discount points to lower their monthly mortgage payments or to make their loan more affordable over time.

Other terms like application fees, processing fees, and service charges may involve costs associated with securing a loan, such as administrative tasks and processing paperwork, but they do not specifically represent a percentage of the loan amount in the same manner as discount points do. Instead, these fees are generally fixed amounts or structured differently and do not directly relate to the long-term interest rate adjustments that discount points provide. Thus, discount points specifically reflect costs tied to the loan amount as a percentage, making it the correct answer.