You are buying a house and will borrow $215,000 on a 30-year fixed rate mortgage
ID: 2771175 • Letter: Y
Question
You are buying a house and will borrow $215,000 on a 30-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.45 percent. Alternatively, she tells you that you can “buy down” the interest rate to 4.20 percent if you pay points upfront on the loan. A point on a loan is 1 percent (one percentage point) of the loan value.
What are the most points you would be willing to pay to buy down the interest rate?
You are buying a house and will borrow $215,000 on a 30-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.45 percent. Alternatively, she tells you that you can “buy down” the interest rate to 4.20 percent if you pay points upfront on the loan. A point on a loan is 1 percent (one percentage point) of the loan value.
Explanation / Answer
Total Money Borrowed 2,15,000.00 Loan period 30 years APR 4.45% Buydown interest 4.20% So the difference between APR and buydown interest is 0.25% Total Payment 3,89,878 Total interest payments for 4.45% 1,74,878 Monthly payment @ 4.45% 1,083.00 Monthly payment @ 4.2% 1,051.39 So paying 1% of 215000 upfront save 32$ approx per month so it can pay 2 points upfront to reduce the interest rate Its savings will be 64 $ per month It depends on the rating of the customer and track records of the customer.
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