Question

Ryan wants to take out a $520,000 loan with an APR of 4.15% for 20 years. He purchased a discount point for 1% of his principal that will decrease his APR by 0.125%. If Ryan purchases 3 points, after how many months will he break even?​

Answer 1

It will take Ryan 59.6 years to break even on his purchase of 3 discount points (1% each) for a $520,000 loan with an APR of 4.15%. This break-even point was calculated by finding the difference in monthly payments between the loan with and without the discount points, and dividing the cost of the points by that difference.