Question
You are about to purchase a house for $425,000 and you are making a down payment of 20 percent. Your mortgage bank is offering two
You are about to purchase a house for $425,000 and you are making a down payment of 20 percent. Your mortgage bank is offering two different mortgage options, both with a fixed rate and a 15-year amortization schedule:
An interest rate of 2.75 percent with no discount points.
An interest rate of 2.5 percent with 1.5 discount points.
Assuming that the closing costs other than discount points are identical, what is the difference in closing costs between these two options (in $)?
If you are neither selling the house nor refinancing the mortgage during the 15 years, what is the present discounted value of the lower mortgage payment associated with the second option net of the additional closing cost?
[Round your answer to the nearest dollar.]
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