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Without buying points, a monthly mortgage payment will be $1,250. buying 1 point at closing would reduce the payment to $1,236. to the nearest year, how long would it take to break even by buying 1 point, with a $100,000 mortgage?
a. 5 years
b. 6 years
c. 7 years
d. 8 years
please select the best answer from the choices provided a b c d

Answer :

It would take b. 6 years to break even by buying 1 point, with a $100,000.

The point at which total expenses and revenues are equal, or "even," is known as the break-even point. Even though opportunity costs have been paid and capital has received the risk-adjusted, expected return, there is no net loss or gain and one has "broken even."

how to figure out what break even is.

The information indicates that the mortgage payment will be $1,250 per month. The closing cost would be $1,236 if one point were bought.

The time taken will be:

Monthly savings = 4250/1236 = 14

Time taken = 7

1000/14 = 71.4 months= 6 years

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