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A buyer expects to live in his new home for about five years. He is shopping for a new $100,000 mortgage. With no points, he can get a 30-year 8% fixed-rate mortgage with principal and interest payments of $733.76. Another lender has a 7.75% mortgage (payments of $716.41) with one point. How many months will it take the buyer to break even on the points if he takes the lower interest loan, using simple arithmetic

Respuesta :

letmeanswer

57.6 months would be taken

Explanation:

Firstly, there is need to find out that by how much in dollars would be paid in the points. Then, divide the amount of points paid by the difference in the monthly payments. Then this will give the outcome of the breakeven number of months.  

The following calculation is done in order to find out.

$100,000 multiply with .01 = $1,000 paid in points.

$733.76 minus $716.41 = $17.35 difference in payments.

$1,000 divided by $17.35 = 57.6 months.

Therefore, the answer is 57.6.