Question

Yolanda closed on a 20 year home loan for $83,000. She chooses to buy only 1 point at closing. By buying a point at her closing, Yolanda reduced her monthly payment by $7.63. Based on the fact that Yolanda chose to buy a point at closing, what would you infer is the minimum amount of time that she will own the home?
a.
6 years
b.
11 years
c.
16 years
d.
20 years

Answer 1

One point = 1% of $83,000 = $830.
Break-even months = 830 ÷ 7.63 ≈ 108.8 months ≈ 9.07 years.

So she must own the home longer than about 9.07 years. The smallest choice greater than that is 11 years.

Answer: b.