Question
You are buying a house and the mortgage company offers to let you pay a point ( 1% of the total amount of the loan)
You are buying a house and the mortgage company offers to let you pay a "point" ( 1% of the total amount of the loan) to reduce your APR from 6.44% to 6.19% on your $403000 , 30-year mortgage with monthly payments. If you plan to be in the house for at least five years, should you do it?
a) The monthly mortgage payment at 6.44% APR is $________
b) The monthly mortgage payment at 6.19% APR is $________
c) The lower interest rate on the mortgage results in monthly savings of $_________
d) The PV of the monthly savings is $______
e) The balance of the mortgage at the end of five years at 6.44% APR is $_________ f) The balance of the mortgage at the end of five years at 6.19%APR is $_________
g) The principal reduction due to the lower interest rate is $________
h) The PV of the principal reduction is $_______
i) The net benefit or cost is $_______
j) Should you pay the point?
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