Question

Without buying points, a monthly mortgage payment will be $1,250. Buying 1 point at closing would reduce the payment to $1,236. To the nearest year, how long would it take to break even by buying 1 point, with a $100,000 mortgage?
a.
5 years
b.
6 years
c.
7 years
d.
8 years

Answer 1

1 point on a $100,000 mortgage costs 1% = $1,000.
Monthly savings = $1,250 − $1,236 = $14.

Break-even time = $1,000 ÷ $14 ≈ 71.43 months ≈ 71.43/12 ≈ 5.95 years.

Rounded to the nearest year: 6 years. (Answer: b)