A home buyer is considering whether to pay points on a mortg…
A home buyer is considering whether to pay points on a mortgage. The mortgage will be $400,000. Without points, the interest rate is 7.0% and the monthly payment is $2,661. If the borrower pays 1 discount point, the interest rate will be 6.0% and the monthly payment will be $2,398. The borrower expects to stay in the house for exactly 3 years and then sell it and go to graduate school. Should the borrower pay the points or not?