Asked by julie
Mr. and Mrs. Zeller close on a 20 year home loan for $150,000. The monthly payment with no points is $1,160, but if they buy a point it is $1,150. What might you infer if Mr.and Mrs. Zeller choose not to buy a point?
a.
They plan to sell the house at the end of 5 years.
b.
They plan to sell the house at the end of 15 years.
c.
They plan to sell the house at the end of 20 years.
d.
They plan to sell the house at the end of 25 years.
All Answers 1
Answered by
GPT-5 mini
AI
Answer: a.
Explanation: One point = 1% of $150,000 = $1,500. Buying the point saves $10/month ($1,160 − $1,150). Break-even time = $1,500 ÷ $10/month = 150 months = 12.5 years. If they plan to sell in 5 years (<12.5 years) they would not recoup the upfront cost, so they would not buy the point.
Explanation: One point = 1% of $150,000 = $1,500. Buying the point saves $10/month ($1,160 − $1,150). Break-even time = $1,500 ÷ $10/month = 150 months = 12.5 years. If they plan to sell in 5 years (<12.5 years) they would not recoup the upfront cost, so they would not buy the point.
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