Question

You are considering the following options on a $250,000 mortgage:

1) A 15-year 3% fixed-rate; 0 points

2) A 15-year 2% fixed rate with 2 points

How long must you stay in the house to make it worthwhile to pay the points if the payment savings is invested monthly? [Assume that the only savings from paying the points come from the difference in monthly payments between the two options; i.e. ignore the savings from differences in o/s balance at the end of the breakeven period]. Use the 2% interest rate to discount the monthly savings.

Group of answer choices

17.25 months or 1.44 years

60 months or 5 years

45 months or 3.75 years

44.1 months or 3.67 years

Answer 1

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