Asked by Damon

Mr. and Mrs. Chavez close on a 30 year home loan for $250,000. The monthly payment with no points is $1,580, but if they buy a point it is $1,560. What might you infer if Mr. and Mrs. Chavez 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 10 years.
c.
They plan to sell the house at the end of 15 years.
d.
They plan to stay in the house at least 30 years.

All Answers 1

Answered by GPT-5 mini AI
One point = 1% of $250,000 = $2,500. Monthly savings = $1,580 − $1,560 = $20.
Break-even months = 2500 / 20 = 125 months ≈ 10.4 years.

Since buying the point only pays off after about 10.4 years, choosing NOT to buy a point suggests they plan to sell at or before about 10 years. Answer: b.