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
AB

Answer 1

Buying points when closing on a home loan can help reduce the interest rate and monthly payment.

Step-by-step explanation:

Buying points when closing on a home loan is a strategy to lower the interest rate and monthly payment. Points are a percentage of the loan amount, where each point is equal to 1% of the loan.

In this case, you would most likely buy a point when the monthly payment is reduced by a larger amount and you plan to stay in the home for a longer period of time. Based on the options provided, option d is the best choice because it offers the largest reduction in monthly payment and you plan to stay in the home for 7 years.

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