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Take Action! Refinancing Buying a home Common Mortgage Financial
Literacy
Terms
There are times when you may want to reevaluate is the largest The term, or length, of No. 8
your mortgage to see if you can get a better purchase you’ll most mortgages is 15
I will start saving a little each month interest rate and reduce your payments, or pay it ever make and or 30 years. The longer
for a down payment on a house off sooner. When you refinance, you basically pay can give you the term the lower your
I will clean up my credit report so I off your existing loan by taking out a better loan. a sense of monthly payment, but the
freedom from renting. When
can get the best rate on a mortgage For example, you have a fixed rate mortgage at you rent, you have restrictions over what you more interest you will pay
7.5%. After 10 years, interest rates have dropped can do to the property, and no control over in the long run.
to 4.5%. Instead of continuing to pay 7.5% increases in rent. When you buy a home, you Fixed Rate mortgage -
interest, you can take out a new loan at 4.5% for are making an investment that will increase your mortgage payment
Prepaying the amount remaining on your current mortgage. in value. As you make payments, you are stays the same every
If you can afford it, consider adding a You may have to pay some fees to do this, but you increasing the equity, or value, of your home. month. You pay the initial
little extra to each mortgage payment. will save in the long run. Being a homeowner also has tax advantages. interest rate.
The extra amount goes towards paying You can deduct the interest you pay on a home Adjustable Rate mortgage
off the principal. loan off your taxes each year. A mortgage, or (ARM) - the rate of interest
Since your principal is smaller, you’ll be paying less interest in the long run. home loan, is a big commitment, and you need changes based on current
to look very carefully at your current budget to interest rates. If interest Home Loans
Assume you have a $80,000 30-year mortgage, at 5.5% interest. rates goes up or down,
1. The total amount you will pay for the house after 30 years is see if home ownership is right for you. so does your mortgage
$163,524. How much interest do you pay? _____________ Many people believe they can’t buy a home payment. Some ARMs may
2. After 5 years, you start adding $100 a month extra to your mortgage payment. because they will never be able to save enough lock in the current rate
You finish paying off the loan 7 years and 9 months early, and paid a total of $141,906. for the initial down payment, but there are for 5 or 10 years and then
How much interest did you pay? __________ many programs and options specifically switch to adjustable every
How much did you save by paying the extra $100 a month?__________ designed for new home buyers that can make year after that.
You can use the online mortgage calculator at: http://www.bankrate.com/ owning a home a reality.
calculators/mortgages/mortgage-loan-payoff-calculator.aspx to find additional payoff options.
How much would you save if you just paid $50 a month extra? Money Matters
8 Approximately 67% of Americans are homeowners
Disclaimer:
Learnovation, LLC’s mission is to empower people to 8 Ideally, a down payment should be around 20% of the purchase price of
improve awareness of their own financial situation. the home. You can purchase a home with 3-5% down.
®
©2017 Learnovation , LLC All Rights Reserved. This information is intended to serve as a general
www.learnovation.com guide of financial principles and strategies. It is not 8 You can save thousands of dollars in interest if you begin making even a
intended to address individual financial issues, nor
should it be taken as legal, financial, or other advice. small additional payment to your mortgage.
8 Clean up your credit report before applying for a mortgage
