Real Estate Math
A Minnesota homeowner refinances their $200,000 mortgage. Closing costs are $4,500. The new mortgage saves $175/month in interest. How many months until the break-even point?
A25 months✓ Correct
B26 months
C24 months
D32 months
Explanation
Break-even months = Closing costs / Monthly savings = $4,500 / $175 = 25.71 months, approximately 26 months.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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