You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender...
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You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or a 5.20% mortgage with 0.61 points. You plan on living in the house for exactly X months, paying only the required payment each month, and without refinancing your mortgage. You find that you are indifferent between the two mortgage options, using the 5.50% rate to discount cash flows between the two options. How many months are you planning on living in the house? Note that all rates in this problem are nominal rates with monthly compounding. 84 60 36 O 48 O 72 You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or a 5.20% mortgage with 0.61 points. You plan on living in the house for exactly X months, paying only the required payment each month, and without refinancing your mortgage. You find that you are indifferent between the two mortgage options, using the 5.50% rate to discount cash flows between the two options. How many months are you planning on living in the house? Note that all rates in this problem are nominal rates with monthly compounding. 84 60 36 O 48 O 72
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