Problem 6-69 Calculating Interest Rates (LO2) You are buying a house and will borrow $205,000 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 4.35%. Alternatively, she tells you that you can "buy down" the interest rate to 4.15% if you pay points up front on the loan. A point on a loan is 1% (one percentage point) of the loan value. You believe that you will live in the house for only eight years before selling the house and buying another house. This means that in eight years, you will pay off the remaining balance of the original mortgage. What is the maximum number of points that you would be willing to pay now? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Maximum points

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem 6-69 Calculating Interest Rates (LO2)
You are buying a house and will borrow $205,000 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 4.35%. Alternatively, she tells you that you can "buy down" the interest
rate to 4.15% if you pay points up front on the loan. A point on a loan is 1% (one percentage point) of the loan value. You believe that
you will live in the house for only eight years before selling the house and buying another house. This means that in eight years, you
will pay off the remaining balance of the original mortgage. What is the maximum number of points that you would be willing to pay
now? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
Maximum points
Transcribed Image Text:Problem 6-69 Calculating Interest Rates (LO2) You are buying a house and will borrow $205,000 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 4.35%. Alternatively, she tells you that you can "buy down" the interest rate to 4.15% if you pay points up front on the loan. A point on a loan is 1% (one percentage point) of the loan value. You believe that you will live in the house for only eight years before selling the house and buying another house. This means that in eight years, you will pay off the remaining balance of the original mortgage. What is the maximum number of points that you would be willing to pay now? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Maximum points
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