Question

purchasing discount points is a decision which can be financially justified or not justified. Create a unique example where purchasing discount points is justified, solve the problem, and explain why the decision is justified. Your example should include the following principle, amount being financed, number of discount points, interest rates with and without points and the monthly payment amounts with and without points.

Answer 1

Purchasing discount points are prepaid interests that air paid upfront in order to reduce the interest of the loan or the mortgage. As an example, a mortgage of $250,000 with 1 point discount means that 1% of the mortgage value is paid in order to reduce the interest rate by a factor set by the lender.