Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are buying a house and will borrow $170,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer
You are buying a house and will borrow $170,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.90%. Alternatively, she tells you that you can buy down the interest rate to 4.65% if you pay points up front on the loan. A point on a loan is 1% (one percentage point) of the loan value. You believe that you will live in the in the house for only seven years before selling the house and buying another house. This means that in seven years, you will pay off the remaining balance of the original mortgage. What is the maximum number of points that you would be willing to pay now? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started