Question

In which of the following cases would you most likely buy a point when closing on a home loan?

a. The monthly payment is reduced by $8 and you plan to sell the home at the end of 3
years.
b. The monthly payment is reduced by $10 and you plan to sell the home at the end of 4
years.
C. The monthly payment is reduced by $12 and you plan to sell the home at the end of 5
years.
d. The monthly payment is reduced by $14 and you plan to sell the home at the end of 7
years.
Please select the best answer from the choices provided
OA

Answer 1

When closing on a home loan, buying points can reduce the monthly payment. In this case, option D with a $14 reduction in the monthly payment would be the best choice.

Step-by-step explanation:

Buying points when closing on a home loan means paying a fee upfront to reduce the interest rate on the loan. This can lower the monthly payment. To determine the best case for buying points, we need to compare the amount saved on the monthly payment with the time the home will be owned. In this case, we should choose the option with the highest reduction in monthly payment, which is option D where the payment is reduced by $14.

Learn more about closing on a home loan