Lincoln Towers Bank offers borrowers a zero closing cost loan. Each negative point reduces the bank’s closing costs by 1% of the principal and increases the APR by 0.125%. Ibraheem wants to borrow $450,000 from Lincoln Towers at 3.48% for 20 years. The estimated closing costs are $9,000.
a. How many negative points does he need to have a zero closing cost loan?
b. What will his new APR be on the loan?
c. There is a chance that in 12 years, his company may be moving to a different state. Are these negative points worth the investment?