You Are Purchasing a New Home and Need to Borrow

question 34

Essay

You are purchasing a new home and need to borrow $325,000 from a mortgage lender. The mortgage lender quotes you a rate of 6.5% APR for a 30-year fixed rate mortgage (with payments made at the end of each month). The mortgage lender also tells you that if you are willing to pay one point, they can offer you a lower rate of 6.25% APR for a 30-year fixed rate mortgage. One point is equal to 1% of the loan value. So if you take the lower rate and pay the point, you will need to borrow an additional $3250 to cover the point you are paying the lender. Assuming that you do not intend to prepay your mortgage (pay off your mortgage early), are you better off paying the one point and borrowing at 6.25% APR or just taking out the loan at 6.5% without paying the point?

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Definitions:

Cultural Mosaic

A society that features a mix of distinct ethnic groups, cultures, and identities, each of which is preserved and valued within the whole.

Multiple Cultural Identities

The phenomenon of an individual identifying with or adapting to various cultural influences and contexts.

Racial Diversity

The inclusion of people from a variety of racial and ethnic backgrounds within a group or organization.

Ethnic Diversity

The presence of a wide range of distinct ethnic or cultural groups within a society or organization.