Question

If closing costs of $1,950 are associated with the refinance of a mortgage that would reduce the monthly payment from $890 to $780, it would take approximately _______ months to cover these costs.

Multiple Choice
a) 8
b) 16
c) 18
d) 20
e) 22

Answer 1

To cover the closing costs, it would take approximately 18 months.

Step-by-step explanation:

To calculate the approximate number of months it would take to cover the closing costs, we need to calculate the monthly savings from the reduced payment:

Monthly savings = $890 - $780 = $110

Next, we divide the closing costs by the monthly savings:

Approximate months to cover costs = $1,950 / $110 = 17.727

Rounding up to the nearest whole number gives us approximately 18 months to cover the closing costs.