Home Mortgage

Interest Rate (Sept. 2020)

2.50% - 5.00%

What is a Mortgage?

If you'd like to not pay rent any longer, and be in charge of your own home, you might choose to buy a home! For that you may need a mortgage.

A mortgage is a loan you can receive from a bank in order to buy property. If you already own a home, you can get a mortgage up to the value of the home in order to get cash that you may need without selling the home.

  • Mortgages will charge interest, as of 2020, usually in the range of 2.5% - 5.0% annually for a fixed rate loan.
  • Mortgages use your property as collateral. If you can't pay the loan, plus interest, the bank can take your home/property.
  • Mortgages require a "down payment" which is a lump sum towards the loan, these can be as low as 5% but often up to 20% of the loan.
  • Usually mortgages are for 15 or 30 year terms.

How Much Will a Mortgage Cost You?

$

Years

%

Enter a value from 2.5 to 5

Results

Monthly Payment$477.42
Total Paid in Interest$71,869.51
Total Cost to You$171,869.51

Is Buying Always Better Than Renting?

You might think that rent is just throwing away money that you'll never get back, but buying builds value in property that you could later sell, right?

This is generally true, but doesn't take into account all the costs associated with buying the home. You have to pay a number of fees up front, that can often cost thousands of dollars. You would pay more fees when you sell the property.

In order for buying to be a better deal, you need to live in the house for a long enough time to build equity in your home that is worth more than the fees you paid, and will pay to move. This is known as the break-even point.

Check out this rent vs buy calculator at Nerdwallet to get a feel for this yourself!

Why Take On a Mortgage?

  • If you plan to live somewhere for a long enough time that you break even.
  • If you are ok with taking on the work and costs associated with owning property (repairs, yard work, being a landlord if you will rent it out).
  • You are confident you can afford the property taxes.

Why Not Take On a Mortgage?

  • If you won't live somewhere long enough to break even, and you'll sell the property too quickly.
  • You can't afford the down payment yet.
  • You are not interested in taking on the work associated with owning a home and repair costs.
Previous Topic: AssetsStudent Loans