You need a 30-year fixed-rate mortgage for $100,000,monthly payments.One lender offers 7.5% with no discount points while another lender offers 7.125% with some points.What amount of points on the second loan would give the loans the same APR?

Question

Quizplus · Accepted Answer

To determine the equivalent points for the loans to have the same APR, you would need to calculate the cost of the points that would offset the lower interest rate of 7.125% to make it equivalent to the 7.5% rate with no points. This involves calculating the present value of the savings from the lower interest rate over the life of the loan and equating it to the upfront cost of the points. The correct calculation results in 3.65 points, making option B the correct choice.

You Need a 30-Year Fixed-Rate Mortgage for $100,000,monthly Payments