SOLUTION: You need a loan of $170,000 to buy a home. Calculate your monthly payments and total closing costs for each choice below. choice 1: 20-year fixed rate at 9% with closing costs of

Question 260613: You need a loan of $170,000 to buy a home. Calculate your monthly payments and total closing costs for each choice below.
choice 1: 20-year fixed rate at 9% with closing costs of $1200 and no points.
choice 2: 20-year fixed rate of 8.25% with closing costs of $1200 and 3 points.
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
points are usually 1% of the cost of the mortgage.

if the mortgage is $170,000, then 1 point = .01 * $170,000 = $1,700.00

3 points is equal to $5,100

if you take a 20 year mortgage at 9% a month with 0 points, then your total costs are as follows:

up front closing: $1,200

monthly payments: $1,529.53

if you take a 20 year mortgage at 8.25% a month with 3 points, then your total costs are as follows:

up front closing: $1,200
up front points: $5,100
total closing: $6,300

monthly payments: $1,448.51

the difference in your monthly payments are: $81.02

the additional up front investment of $5,100 is earning you $81.02 per month for a period of 20 years.

you will recoup this $5,100 investment without interest in 62.94742039 months.

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