Yolanda closed on a 20 year home loan for $83,000. She chooses to buy only 1 point at closing. By buying a point at her closing, Yolanda reduced her monthly payment by $7.63. Based on the fact that Yolanda chose to buy a point at closing, what would you infer is the minimum amount of time that she will own the home?

One point costs 1% of the $83,000 loan, or $830. At $7.63 saved each month, Yolanda needs about $830 ÷ $7.63 ≈ 109 months, or just over 9 years, to recover that cost. Of the choices, 11 years is the shortest ownership period long enough to make buying the point worthwhile.

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