Patrick is a recently divorced single father and will be filing head of household and itemizes. As a result of the divorce from his husband he will need to refinance the mortgage on the home. The bank has offered Patrick the option of paying points on the mortgage in order to receive an annual interest rate reduction. Patrick will also make interest-only payments for the first four years. Patrick has asked you to produce a calculation to assist in determining whether or not paying points makes the most financial sense from a tax perspective.

1. Complete the analysis using formulas and references to the data provided in E14:E20.

10 11 (HINT: Annualize the break-even years using 365 days to determine the Break-Even Date) 12 13 14 Mortgage Amount Mortgage: $ 240,000 15 Proposed Points Points: 4 16 Net After-Tax Cost of Points Rate with Points: 4.75% 17 Annual Interest Rate Savings Rate without Points: 5.25% 18 Less: Lost tax benefit of higher interest Mortgage Length (Years): 30 19 Net After-Tax Savings of Lower Interest Marginal Tax Rate: 24.00% 20 Point Amortization Tax Benefit Start Date: 4/1/2023 21 Annual After-Tax Benefit of Points 22 Break-Even Point of Points: Years 23 Break-Even Date: 24 25 26