Home Buying

The One Financial Mistake that Could Cost Homeowners a Bundle

“Interest rates have bounced around historical lows for years, yet a surprising number of homeowners who could benefit from a refinancing still haven’t taken advantage of the potential cost savings.”

In this article, Marine Cole points out some surprising facts about interest rates and the reasons why people don’t refinance their homes.  According to Ms. Cole and other experts, some people are simply unaware of their current rate or don’t have the get-up-and gumption to refinance.  Other factors include procrastination, mistrust, and the inability to understand complex decisions may also be barriers to refinancing.

The article also points out that the decision to refinance could result in thousands of dollars in savings for the homeowner.  For example, refinancing a 30-year, $200,000 mortgage from 6.5 percent to a current rate of 3.35 percent will save approximately $130,000 in interest payments over the life of the loan.

For more information, click here

Teaching Suggestions

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

  • Stress the importance of making sound financial decisions not only when buying or refinancing a home, but other aspects of your financial life.
  • Discuss the reasons mentioned in this article that describe why people would not refinance and take advantage of lower interest rates for buying or refinancing a home.

Discussion Questions

  1. How important is comparing interest rates when either purchasing a home or refinancing an existing home mortgage?
  2. According to this article, there are many reasons why people don’t refinance their home. If you were refinancing a home mortgage, what would be your major obstacle to refinancing an existing home mortgage?  How could you overcome this obstacle?
  3. Assuming you had a chance to refinance your home and save $100,000 over the life of the loan, would you refinance? Explain the factors that would influence your decision.
Categories: Chapter 8, Financing a Home, Home Buying | Tags: , | Leave a comment

The Seven Baby Steps (Dave Ramsey)

“Get out of debt the same way you learned to walk–one step at a time.”

This article describes Dave Ramsey’s seven steps that anyone can take to get out of debt and begin to manage their personal finances.  These seven basic principles have been taught by Mr. Ramsey via radio, books, Financial Peace University, live events, and online.  Listed below are the seven steps discussed in this article.  Note:  You can get more information about each step by clicking on the “Learn More” tab.

  1. Begin by creating a $1,000 emergency fund.
  2. Pay off all debt using the debt snowball .
  3. Save 3 to 6 months of expenses in a savings account.
  4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement accounts.
  5. Create a college funding plan for your children.
  6. Pay off your home mortgage early.
  7. Build wealth and give.

For more information, click here

Teaching Suggestions

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

  • Ask students visit the Dave Ramsey website.
  • Discuss some or all of the seven baby steps described in this article. Reminder:  Students can get more information by clicking on the “Learn More” tab.

Discussion Questions

  1. How can the seven baby steps help you manage your personal finances?
  2. Do the steps in this article make you want to change your priorities and what’s important in your life? Justify your answer.
Categories: Budget, Chapter 1, Chapter 2, Chapter 5, Debt, Financial Planning, Home Buying, Savings | Tags: , , , | Leave a comment

Rents Are Rising . . . And So Are Evictions

“The average renter now spends 30% of their income on rent, up from a longtime average of about 25%, according to Zillow.”

Over the past year, average salaries have increased 1.8 percent.  At the same time, the average rental cost for apartments, houses, condos, and other housing has risen 7 percent.

The Neighborhood Law Clinic at the University of Wisconsin Law School estimates that several million families a year face evictions nationwide.  In fact, for many tenants, an unexpected emergency or unexpected expense can lead to eviction.  Most often, evicted tenants face a very difficult time finding a new home that is often in a different neighborhood or a home that is not as nice as their last home.

While the major reason for a tenant’s eviction is not paying the rent, some landlords will look for minor violations like loud noise or having a pet when there is a no pet policy to evict tenants.  Then, landlords will rent to a new tenant that is willing (and able) to pay higher rent.  In some cases, the owner of the rental property will sell the property or convert the property to condos.

For more information go to http://money.cnn.com/2014/10/29/real_estate/evicted/index.html

Teaching Suggestions

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

  • Discuss the importance of choosing a housing option that you can afford.
  • Stress the importance of budgeting for housing and other major expenses and establishing an emergency fund.

Discussion Questions

  1. While most everyone wants a nice, safe place to call home.  What factors affect your choice when choosing an apartment, condo, or house to rent or buy?
  2. Does the fact that the average tenant spends 25 to 30 percent of their income on rent and that there are no tax advantages or equity buildup when you rent, encourage you to purchase your own home? Justify your decision to rent or buy.
Categories: Chapter 7, Home Buying | Tags: | Leave a comment

Mistakes of Homebuyers

An increasing number of homebuyers are coming into the market. However, along with that trend, is an increasing number of financial regrets due to mistakes such as:

  •  considering that renting may still be a viable financial choice in some situations; for example, if you may be moving due to a job or other circumstances.
  • with rising housing prices and higher mortgage rates, some buyers may not be competitive when bidding on a property.
  • other debts (such as a high car loan) may limit the monthly payment a person can afford.
  • putting too much faith in online property prices, which can give a false sense of true home values.
  • skipping the home inspection can result in not being aware of subtle home defects.
  • unrealistic expectations of the future appreciation of the home.

For additional information on mistakes made by homebuyers go to:

http://www.cnbc.com/id/101837611

Teaching Suggestions

  • Have students research suggestions for avoiding home buying mistakes.
  • Ask students create an in-class presentation with suggestions for avoiding home buying mistakes.

 Discussion Questions 

  1. What actions might be taken to avoid these home buying mistakes?
  2. Describe other difficult situations that a person might encounter in process of buying a home.
Categories: Chapter 7, Home Buying, Purchasing Strategies | Tags: , , | Leave a comment

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