Corporations and humans go through a similar decision-making process when buying assets. 

In this case, you are buying a house and your mortgage company/bank offers to "let" you buy a "point" (1% of the loan amount) to reduce your APR from 6.5% to 6.25% on your $400,000, 30-year mortgage. 

Explain when you would/should buy the point and when you would/should not buy the point for the three scenarios below if:

A) You plan to be in the house for less than 5 years?

B) You plan to be in the house for 5-15 years? 

C) You plan on this being your "forever" home? This means you have the mortgage for the full 30 years.

Answer rating: 100% (QA)

Deciding whether to buy points on a mortgage is essentially a financial tradeoff between upfront costs and longterm savings on interest Points can hel... View the full answer