Marina wants to take out a $500,000 loan to purchase a new home. The bank offers a

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Marina wants to take out a $500,000 loan to purchase a new home. The bank offers a 25-year loan with an APR of 3.8%. If she purchases 1 point for 1% of the value of the loan, she will reduce her APR by 0.3%.

a. What is her monthly savings with the point purchase?

b. When will she break even?

c. Assume she decided not to buy the point and put the cost into a certificate of deposit that pays 1.5% interest compounded monthly. Would this have been a better way to use the cost of the points? Explain.

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