Answer:
Monthly payment would be $ 29.71 lower
Step-by-step explanation:
In order to determine the reduction in monthly due to purchase of 2 points ,it would helpful to know monthly payment without purchase of points.
The down payment =20%*$125,000=$25,000
mortgage amount=$125,000-$25,000=$100,000
monthly payment=pmt(rate,nper,pv,fv)
rate is 4.75%/12=0.003958333
nper is the number of months of repayment=30*12=360
pv is the actual amount of mortgage loan of $100,000
fv is the total amount of repayments,it is not known hence taken as zero.
=pmt(0.003958333,360,-100000,0)=$ 521.65
By buying 2 points interest rate would reduce by 0.5% as every 1 point purchased is equivalent 0.25% reduction in interest.
=pmt(4.25%/12,360,-100000,0)=$491.94
Reduction in monthly payment= 521.65-491.94=$29.71
