Question

Todd Foley is applying for a $240,000 mortgage. He can select either a $1,680 monthly payment with no points or a $1,512 payment with 4 points. How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment

Answer 1

57 months

Step-by-step explanation:

Calculation of number of lower monthly payment

Number of months = Percentage discount Points * Principal / Higher amount without point - Lower amounts with point

Number of months = $240,000 * 0.04 / $1,680 - $1,512

Number of months = $9600 / $168

Number of months = 57.14285714285714

Number of months = 57 months

Hence, it will take 57 months to cover the cost of the discount points if he take lower monthly payments .