Question

HELP PLEASEEEEE.

Answer 1

how much is a point? it is 1% of the loan?

Answer 2

I am not sure?

Answer 3

then you can't do the problem, because you don't know if you have enough money to buy the points

Answer 4

I really need help though

Answer 5

the problem says she has $5500 to buy the points...

Answer 6

ok

Answer 7

does it say how much a point is?

Answer 8

Figure out the total outlay in both scenarios. in one scenario, it is payments for half the life of the loan, and no points. in the other scenario, it is somewhat lower payments for half the life of the loan, plus the points. compare which is lower.

points are 1% of the loan each

Answer 9

2 discount points = 2% of $207,000

Answer 10

no it doesn't i posted the question exactly how it is..

Answer 11

oh ok

Answer 12

then i guess you have enough money
now compute how much you will pay in 10 years by computing
\[10\times 12\times 1712.16\] with no points, and also
\[10\times 12\times 1686.62\] with the two points and see if you save more than you pay for the points

Answer 13

not really a realistic consideration though, because maybe you would rather keep the money for the points now, for example in case you need a new roof

Answer 14

for 10*12*1712.16 i got 205459.4

Answer 15

to the contrary, it is an entirely reasonable calculation done by home buyers and refinancers all the time!

Answer 16

and for 10*12*1686.62 i got 202394.4

Answer 17

but being able to predict how long you'll be in the property can be challenging!

Answer 18

i am so confused guys help me solve it

Answer 19

??????????

Answer 20

@whpalmer4

Answer 21

Cost of loan without points: 10 years of 12 payments each @ 1712.16 = $205459.40
Cost of loan with points: 10 years of 12 payments each @ 1686.62 + 2% of borrow amount = $202394.4 + $4140 = $206534.40

The loan with points costs more than the loan without points if the property is only held for half the term of the loan.

The break-even point for paying the points is at the number of payments (\(n\)) where
\[1712.16n \ge 1686.62n + 4140\]which is just past the halfway point of the 13th year (\(n = 162.099\)).

Answer 22

^ i posted another