Loan Option 1: 279,000; 5.3875%; 30 years with 1 point

Loan Option 2: $279,000; 5.875%; 30 years with no points

1. Compare the two loans: (a) what are their monthly payments and (b) if you chose the loan with points, how long would it take for you to break even?

a.)

loan 1 = $1,797.49

loan 2 = $1,769.64

break even points = 39.26 months

b.)

loan 1 = $1,794.92

loan 2 = $1,650.39

break even points = 27.75 month

c.)

loan 1 = $1,564.49

loan 2 = $1,650.39

break even points = 35.19 months

d.

loan 1 = $1,385.73 loan 2 = $1,279.47 break even points = 30.57months