Question

Todd Foley is applying for a $133,000 mortgage. He can get a $821 monthly payment for...

Todd Foley is applying for a $133,000 mortgage. He can get a $821 monthly payment for principal and interest and no points, or a $711 monthly payment with 2.325 points. Approximately, how many months will it take Todd to cover to cost of the discount points if he takes the lower monthly payment? (Round your answer to the nearest whole month.)
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Answer #1

We can calculate the number of months for lower monthly payments with the following formula:

Number of months = (Principal amount *discount points percentage)/(Higher amount-lower amount)

                                      = (133000*2.325%)/(821-711)

                                     = 3092.25/110

                                     = 28months

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