You are buying a house and will borrow $225,000 on a 30-year fixed rate mortgage with monthly
Question:
You are buying a house and will borrow $225,000 on a 30-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.3 percent. Alternatively, she tells you that you can “buy down” the interest rate to 4.05 percent if you pay points up front on the loan. A point on a loan is 1 percent (one percentage point) of the loan value. How many points, at most, would you be willing to pay to buy down the interest rate?
Step by Step Answer:
To find the breakeven points we need to solve for the interest rate for the loan with points using t...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-1260153590
12th edition
Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan
Related Video
Interest, debt, finance, and capital markets are all important concepts in the world of economics and business. Interest is the cost of borrowing money, and it is typically expressed as a percentage of the amount borrowed. Debt is the money that is borrowed, and it has to be repaid with interest. Finance is the study of how individuals, companies, and organizations manage their money and investments. Capital markets are the places where companies and governments can raise money by selling stocks and bonds to investors. These markets play an important role in the overall economy by helping to fund investment and growth.
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