Question

Todd foley is applying for a 100,000 mortgage. he can get a 600 monthly payment for principal and interest and no points, or a 520 monthly payment with 2 points. how many months will it take todd to cover the cost of the discount points if he takes the lower monthly payment

A 6
B 10
c 18
D 25

Answer 1

D. 25

Explanation:

The 2 points cost Foley 2% × $100,000 = $2000. He saves $600 -520 = $80 per month, so it will take him

... $2000/($80/mo) = 25 mo

to save the cost of the points.