Question

The bank offers Mario a fixed rate loan with no points and a fixed rate loan with points. The difference in monthly payments between the loan with points and the loan without points is $37.18. The cost of the points is $2600. What number is closest to the break-even point rounded to the nearest month?

Answer 1

Answer: The break even point is after 70 months.

Mario is saving $37.18 each month by paying the points on his loan. However, he had to pay $2600 for the points. The break even point is the number of months that it will take his savings to total the $2600.

Divide 2600 by 37.18 and you get 69.9 months.