without buying points, a monthly mortgage payment will be $958. buying 1 point at closing would reduce the…

without buying points, a monthly mortgage payment will be $958. buying 1 point at closing would reduce the payment to $948.75. if each point costs $1000.00, rounded to the nearest year, how long would it take to break even by buying 1 point?\na. 7 years\nb. 8 years\nc. 9 years\nd. 10 years\nplease select the best answer from the choices provided

without buying points, a monthly mortgage payment will be $958. buying 1 point at closing would reduce the payment to $948.75. if each point costs $1000.00, rounded to the nearest year, how long would it take to break even by buying 1 point?\na. 7 years\nb. 8 years\nc. 9 years\nd. 10 years\nplease select the best answer from the choices provided

Answer

Explanation:

Step1: Calculate monthly savings

The monthly savings by buying 1 - point is the difference between the non - point and point mortgage payments. So, $958−948.75 = 9.25$.

Step2: Calculate annual savings

Since there are 12 months in a year, the annual savings is $9.25\times12=111$.

Step3: Calculate break - even time

The cost of 1 point is $1000$. To find the number of years to break even, we divide the cost of the point by the annual savings. Let $n$ be the number of years. Then $n=\frac{1000}{111}\approx9.009$. Rounding to the nearest year, $n = 9$.

Answer:

C. 9 years