You plan to purchase a house for $175,000 using a 15-year mortgage obtained from your local bank.

Question:

You plan to purchase a house for $175,000 using a 15-year mortgage obtained from your local bank. You will make a down payment of 25 percent of the purchase price. You will not pay off the mortgage early. (LG 7-3)

a. Your bank offers you the following two options for payment:

Option 1: Mortgage rate of 5 percent and zero points.

Option 2: Mortgage rate of 4.75 percent and 2 points.

Which option should you choose?

b. Your bank offers you the following two options for payments:

Option 1: Mortgage rate of 4.85 percent and 2 points.

Option 2: Mortgage rate of 4.68 percent and 3 points.

Which option should you choose?

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