Mortgage Rates Fall Again

Cheap mortgage rates are a bonanza for home buyers.

Currently, home mortgage rates are trending lower which is good news for home buyers.  According to a recent Freddie Mac survey, the 30-year fixed rate is 4.28 percent.  The 15-year fixed rate is 3.32 percent.

So how important is a lower home mortgage rate for a home buyer? 

• At a rate of 6 percent, the monthly mortgage payment for a $200,000 thirty-year mortgage is $1,000 a month ($200,000 x 6% ÷ 12 = $1,000). 
• If the rate drops to 4.28 percent, the monthly payment drops to $713 a month ($200,000 x 4.28% ÷ 12 = $713). 
• That’s a difference of $287 each and every month.
• Assuming the home buyer makes monthly payments for the entire 30-year period, that’s a savings of $103,320 ($287 x 12 x 30 = $103,320).

For additional information about mortgage rates and the factors that cause rates to increase or decrease go to http://money.cnn.com/2014/03/06/real_estate/mortgage-rates/index.html.

Discussion Questions

1.  What are the common mistakes people make when they finance a home?

2.  Why would you consider a 15-year mortgage instead of a 30-year mortgage?

3.  Why would you consider a 30-year mortgage instead of a 15-year mortgage?

Teaching Suggestions

You may want to use the information in this blog post and the original article to discuss

• Why a home buyer should compare mortgage rates when financing a home purchase.
• The advantages and disadvantages of a 30-year and a 15-year home mortgage.