4. 15-YEAR VS. 30-YEAR
15-year 30-year
Pay off faster, Build equity faster Takes longer to pay off
Higher payments Lower payments
Lower interest rate (about ½
percent)
Higher interest rate
If you don’t plan on investing, it is
better to pay off your mortgage
faster
Alternative uses for saving
investing
5. FIXED-RATE MORTGAGES
Interest rates never change
Monthly mortgage payment does not change
No uncertainty
BUT… if interest rates fall (and you can’t refinance), you are
stuck with your higher-cost mortgage
6. ADJUSTABLE RATE
MORTGAGES
• Interest rate varies over time
• Can change yearly, or even monthly
• Most often, every 6 or 12 months
• Monthly mortgage payment fluctuates
• Advantage: Potential interest savings
• Lower rates for the first few years
• After that, your rate depends on overall trends
7. CHOOSING BETWEEN
FIXED AND ADJUSTABLE
• Consider your ability to take on financial risk
• Reliability of income
• Job security
• Emergency savings
• Future expenses
• Stress level
• If you can’t afford the highest allowed payment on an
adjustable-rate mortgage, don’t take it.
8. CHOOSING BETWEEN
FIXED AND ADJUSTABLE
• Consider how long you plan to keep the mortgage
• Adjustable rate mortgages have lower interest rates for the
first few years.
• Wise if you plan on keeping your mortgage less than 5-7
10. SHOPPING FOR A
LENDER ON YOUR OWN
• Large banks usually don’t offer the best rates
• Check out smaller lending institutions
• Using a local bank can sometimes be a plus. Their staff
generally understand the specifics of local properties
• Find mortgage companies in cities across the country
11. HIRING A MORTGAGE
BROKER
• Brokers
• Submit the home buyer's application to one or more
lenders
• Work with the chosen lender until the loan closes
• Can often find a lender who will make loans that a bank
refuses
• May be necessary for problem credit
12. MORTGAGE BROKERS
Get paid a percentage of the loan amount
• typically 0.5-1%
Ask your mortgage broker what his cut is
The broker should shop among lenders to get you a good deal
Help you fill out documents lenders demand before giving you a
loan
13. BEWARE
• Some brokers place their business with the same lenders
all the time, those usually don’t offer the best rates
• You can shop on your own, so you can compare with what
your broker tells you
• Thoroughly check a broker’s references before you do
business with them
• Make sure you ask who the lender is—most brokers refuse
to reveal this info until you pay a certain amount to cover
the appraisal and credit report
15. POINTS
• The initial fee charged by the lender, with each point being
equal to 1% of the amount of the loan.
16. THE SEESAW EFFECT
• As points go up, the interest rate goes down. As points
go down, the interest rate goes up.
• It is important to consider both the points and the interest
rate when comparing two mortgage loans.
19. 1. Why is it financially wise to make a down payment of at least
20 percent of the purchase price of the property?
2. Why would you choose a fixed-rate loan? An adjustable rate
loan?
3. Why should you consider both the interest rate and the
points of a loan when shopping for a loan?
ESSENTIAL QUESTIONS
WHAT ARE YOU LEARNING? WHY ARE YOU LEARNING IT? HOW WILL YOU USE IT?
