Kevin's bank offered him a 4.5% interest rate for his mortgage. if he purchases 3 points, what will be his new rate?

Buying a home can offer so many options that you may not be able to really make the right decisions about the loan you are looking for. One of the many options that you may have is that of paying points. By paying points on your mortgage, you lessen the overall cost of your monthly mortgage payment because you are paying the points ahead of time. Points are paid up front and are designed to be the amount of your mortgage interest. If you pay points, you pay a one time fee to reduce the initial interest rate on your loan.  

Subtracting 3 points from 4.85% would equal 1.85%.Step-by-step explanation:

1.5%

Step-by-step explanation:

If you want to lower your monthly payments, purchasing points can be an option. When you purchase points you will reduce your monthly payment since you paid interest in advance. Usually every point purchased is equal to 1% of the total mortgage loan, for example, if your total loan's principal was $500,000, every point costs $5,000.

In this case, since Kevin purchased 3 points, his mortgage interest rate will lower from 4.5% to 1.5% (= 4.5% - 3%).

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step-by-step explanation:

first, eliminate the parenthesis:

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2

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4

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second, group like terms:

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third, combine like terms:

(

3

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→

−

1

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+

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→

−

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2