16.07.2022 - 17:53

# A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0% with zero points or at a rate of 5.5% with 2.25 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar) Question: A homeowner can obtain a$250,000, 30-year fixed-rate mortgage at a rate of 6.0% with zero points or at a rate of 5.5% with 2.25 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar)?

The net present value of paying the points can be calculated using a present value formula. First, we need to calculate the total cost of each loan option over 30 years: Option A: Loan amount = $250,000 Interest rate = 6.0% Number of years = 30 Monthly payment =$1,498.88 Total payments over 30 years = 12 * 30 * $1,498.88 =$539,596.80 Option B: Loan amount = $250,000 Interest rate = 5.5% Number of years = 30 Points = 2.25% of loan amount = 0.0225 *$250,000 = $5,625 Loan amount after points =$250,000 - $5,625 =$244,375 Monthly payment = $1,386.07 Total payments over 30 years = 12 * 30 *$1,386.07 = $498,385.20 Next, we need to calculate the present value of the cost of each option: Option A: Interest rate = 6.0% Number of years = 30 Total cost =$539,596.80 Present value = $539,596.80 / (1 + 0.06/12)^(12*30) =$174,955.87 Option B: Interest rate = 5.5% Number of years = 30 Total cost = $498,385.20 +$5,625 (points) = $503,010.20 Present value =$503,010.20 / (1 + 0.055/12)^(12*30) = $169,641.87 The net present value of paying the points is the difference between the present value of Option A and Option B: Net present value =$174,955.87 - $169,641.87 =$5,314 Therefore, the net present value of paying the points is $5,314 to the nearest dollar. Do you know the answer? Not sure about the answer? Find the right answer to the question A homeowner can obtain a$250,000, 30-year fixed-rate mortgage at a rate of 6.0% with zero points or at a rate of 5.5% with 2.25 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar) by subject History, and if there is no answer or no one has given the right answer, then use the search and try to find the answer among similar questions.