Corporations and people go through a similar decision-making process when buying assets.
In this case, you are buying a house and your mortgage company/bank offers to “let” you buy a “point” (1% of the loan amount) to reduce your APR from 6.5% to 6.25% on your $400,000, 30-year mortgage.
Explain when you would/should buy the point and when you would/should not buy the point for the three scenarios below if:
A) You plan to be in the house for less than 5 years?
B) You plan to be in the house for 5 -15 years?
C) You plan on this being your “forever” home? This means you have the mortgage for the full 30 years.
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