Question

Purchasing discount points is a decision which can be financially justified or not justified. Create a unique example where purchasing discount points is not justified, solve the problem, and explain why the decision isn’t justified.

Answer 1

@Loser66 @wio

Answer 2

@amistre64 i really need your help

Answer 3

@aaronq

Answer 4

i think jim thompson knows about discoutn points, ive never really covered them.

Answer 5

it has something to do with the amount of interest but im not very knowledgeable about them, srry

Answer 6

@jim_thompson5910

Answer 7

@phi

Answer 8

@Michele_Laino

Answer 9

@Destinymasha

Answer 10

I'm very sorry, I'm not good in financial mathematics

Answer 11

@iheartfood @KyanTheDoodle

Answer 12

is this for a mortgage?

Answer 13

yes

Answer 14

according to wikipedia
https://en.wikipedia.org/wiki/Point_%28mortgage%29

Accordingly, if the intention is to buy and sell the property or refinance in a rapid fashion, buying points is actually going to end up costing more than just paying the loan at the higher interest rate.

wiki article says 1 point typically reduces the interest by 1/8 %

I would make up a scenario where you buy a house, "fix it up" and then sell it, and you want to do this in one year. In such a case, the points will cost more than the interest saved.

Answer 15

hmm but how will that be created

Answer 16

Jennifer bought a house for about $275,000 last year .

Answer 17

@phi

Answer 18

ok. I was looking for an "amortization schedule"
http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

you put in the amount, the interest and number of years
then click on show amortization schedule.
look for the total interest paid after one year

then subtract 1/8 of a percent i.e. 0.125 from the interest
and re-do the schedule
look for the total interest paid after one year

the difference is how much you save in interest ( a few hundred dollars, ??)
but then add the cost of a 1% discount (i.e 1% times the amount of the loan)