You plan to purchase a house for $ 195,000 using a 30-year mortgage obtained from your local

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You plan to purchase a house for $ 195,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price. You will not pay off the mortgage early.
a. Your bank offers you the following two options for payment: Option 1: Mortgage rate of 5.5 percent and zero points. Option 2: Mortgage rate of 5.35 percent and 1.5 points. Which option should you choose?
b. Your bank offers you the following two options for payments: Option 1: Mortgage rate of 5.35 percent and 1 point. Option 2: Mortgage rate of 5.25 percent and 2 points. Which option should you choose?

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Financial Markets and Institutions

ISBN: 978-0077861667

6th edition

Authors: Anthony Saunders, Marcia Cornett

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