Category Archives: Mortgages

How Much Do Americans Pay In Interest On Their Debt?

This chart released quarterly by the Federal Reserve presents several learning opportunities:

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Lesson 1: Mortgage debt far exceeds all other consumer debts with a total of $8.12 trillion as of the end of Q2 2015. The next closest, student loan debt, stood at $1.19 trillion or almost 1/8 the amount of mortgage debt. Continue reading

Chart of the Week: Is It Easy To Get A Loan?

From Quartz:

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Interesting chart showing rejection rates by loan type over the past 18 months.  It provides an effective way to show the difference between secured (mortgage and auto loans) and unsecured loans (credit cards) and why lenders think differently about them.  Here are a few questions to ask students: Continue reading

Analyze This: What’s the Value of Comparing Mortgage Lenders On A Per Hour Basis?

As an educator, it is easy to tell students that before they buy any financial product (or any product for that matter), they should comparison shop.  Far better, in my mind, to have students discover on their own the dollar and cents impact of spending a little extra time comparing alternatives, which is why I love this new “Check Interest Rates for your Situation” tool from the CFPB.

The tool allows consumers to see the range of interest rates on home mortgage loans available based on their situation (state of residence, credit score, size of loan, amount of down payment, loan type.  Note that the data points change daily, so the example I provide today (2/23/15) will likely have different values if you replicate it in the future.

First, use this data to create a scenario using the CFPB tool: Continue reading

Question of the Day: What Percentage of Mortgage Borrowers Don’t Shop Around?

Answer:  Arguably, it is the biggest purchase that most people will make in their lifetime and yet 47% don’t shop around for their home mortgage.

Amazing statistic from CFPB report:

Buying a home is a big purchase, but it’s just that: a purchase. When it comes to spending money on our daily expenses, we have lots of options to help us find the best deal possible. Take, for example, digital gadgets. To get a good deal you can search for sales, find coupon codes, and research whether it’s less expensive to buy something from a big box retailer or on the manufacturer’s website.  We shop to find the best price for laptops or appliances, but a report of recent mortgage borrowers found that almost half of us don’t shop around for a mortgage when we buy a home.

Now, I know that home purchases are not typically on the mind of high school and college students but I think this statistic points to a more general problem among consumers when it comes to financial products:  they don’t like to shop around.  The NGPF curriculum incorporates comparison shopping activities as a core element.  To do this effectively requires building a foundational knowledge of financial products, knowing what factors matter and having the research skills to be able to compare products across these factors.

Why is the ability to comparison shop so important?   Continue reading

Question: How Much Of An Impact Does Your Credit Score Have On Your Interest Rate?

I often find myself saying in class something along the lines of “You will pay more for loans (if you can even get them) if you have a low credit score.  This mini-activity allows students to see ACTUAL data to calculate exactly how much more you would pay on a 30-year mortgage if you have a low credit score.

I found this chart on the FICO.com site:

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Here are some questions that you can ask: Continue reading

Behavioral Finance At Work: Why Don’t People Refinance Their Mortgages?

I know that it is hard to engage students about mortgages or explain how or why to refinance, so I file this post under:  a reminder that the world is messy and we are not the economically rational beings always acting in our best interest.  Fascinating paper studied why mortgage holders who would have benefited from a refinance at lower interest rate chose not to.  This chart tells the story by graphically displaying the value of savings that households were giving up by not refinancing…yes, at the far end of the tail is $100,000+ that could have been saved over the life of the loan:

RefiChart

So, why don’t people take advantage of this low-hanging fruit?   Continue reading