You are about to take a mortgage and you plan to hold it for 16 years. A lender offers you a 30-year fixed-rate mortgage of $225,000 at a contract rate of 6.5% with 2 discount points. Another lender offers you a 16-year fixed-rate mortgage of $225,000 at a contract rate of 5.41%. What amount of discount points on the 16-year loan will equalize the effective costs of these loans over the 16-year holding period?

You are about to take a mortgage and you plan to hold it for 16 years. A lender offers you a 30-year fixed-rate mortgage of $225,000 at a contract rate of 6.5% with 2 discount points. Another lender offers you a 16 -year fixed-rate mortgage of $225,000 at a contract rate of 5.41%. What amount of discount points on the 16-year loan will equalize the effective costs of these loans over the 16 -year holding period