Buying a Home Mortgage Decisions PwC's Earn Your Future Curriculum

Transcription

1 Buying a Home Mortgage Decisions PwC's Earn Your Future Curriculum

2 Table of contents Introduction... 3 Lesson description... 3 Grade(s)... 3 Lesson time... 3 Pre-visit prep... 4 Student learning objectives... 4 Materials Minute Prep... 5 Background... 5 Vocabulary... 5 Sources... 6 Pre and Post Assessments... 6 Lesson activities... 6 Evaluation/assessment of student learning Extensions/enrichment PwC Page 2 of 17

3 Introduction The reality is that all children don t know the basics of saving and investing. It s a skill they need to be successful in our economy. Education Secretary Arne Duncan, April Recent history underscores the immediate need for youth to develop skills in math and financial literacy, and yet current data shows there is a lack of access to curricula for students to learn: A 2011 survey conducted by American Express found that a majority of parents with children in high school or college gave schools below-average or failing grades in teaching responsible spending. A 2012 survey by Junior Achievement and Allstate Foundation showed 23 percent of teens are uncertain about their ability to budget successfully. Despite the fact that 13 states mandate personal finance coursework as a high school graduation requirement, there is no national legislation mandating that it be a requirement in schools.* The enclosed lesson plan about financial literacy is designed to increase students proficiency in financial literacy. Your expert knowledge and real-life examples, coupled with this one- hour lesson plan aligned to national standards in personal finance education, will fill a critical gap in our current education system and better prepare the next generation of leaders to make sound financial decisions and be productive citizens. We applaud your efforts to bolster students understanding of concepts critical to the health of our economy and stability of our nation. Furthermore, we thank you for serving as an ambassador for PwC, reinforcing our commitment to helping students improve their skills in financial literacy and to youth education overall. Lesson description Students will learn about some of the variables of a mortgage, including amount of principal, length of mortgage, and interest rate. Students will calculate various scenarios to determine which of these three variables has the greatest impact. Interest rate will be discussed so students understand how compounding interest increases the interest paid on a mortgage. Grade(s) 9-12 Lesson time min PwC Page 3 of 17

4 Pre-visit prep Review the 5-minute prep to familiarize yourself with the lesson topic and vocabulary Review handouts to familiarize yourself with their structure and requirements lesson materials listed under Materials section below Student learning objectives Students will: Define common terms used in mortgages including principal, interest, fixed and variable interest rates, amortization table, and closing costs Materials For up to 30 students, obtain ahead of time: Class/group Chart paper or white/chalk board Markers Poster for Recommended Monthly Expenses* Poster for Home Equity* Handout A Answer Key Things to Know about a Mortgage (1 copy for the facilitator) Handout B Answer Key Amortization Table (1 copy for the facilitator) Handout C Answer Key Mortgage Decision Worksheet (1 copy for the facilitator; facilitator may use numbers provided or calculate data for the given area. Please see instructions for Activity E for more details.) PowerPoint Presentation Learning about a Mortgage * Note: If these posters can t be printed on paper larger than 8 ½ by 11, the facilitator may save them on a flash drive and display them on an overhead projector. Student Calculators (1 per student) Handout A Things to Know about a Mortgage (1 per student ~ 30 copies) Handout B Amortization Table (1 per student ~ 30 copies) Handout C Mortgage Decision Worksheet (1 worksheet for each student in group ~ 6 copies of Mortgage A; 6 copies of Mortgage B; 6 copies of Mortgage C; etc.) PwC Page 4 of 17

5 5 Minute Prep Background Purchasing a home has often been referred to as the American dream. The list of benefits for homeowners can be long. However, the list of arguments against home ownership can also be long. Home ownership is a decision that should not be taken lightly and should fit the circumstances of individuals and their families. The pros and cons of buying or renting, along with affordability of housing, must first be discussed. If the decision to purchase a home is made, then the future homeowner must become knowledgeable about mortgage terms as well as the types of mortgages offered. From there, a true understanding of variables affecting the costs of a mortgage and how that mortgage is paid off is needed. Whether the ultimate decision is to buy or rent, an understanding of all aspects of either is needed to help people on their way to sound financial decision making. Vocabulary Amortization Table: a schedule of payments showing the amounts of principal and interest that make up each payment Closing Costs: costs associated with obtaining a mortgage including but not limited to origination fees, taxes, and insurance Compound Interest: interest paid or to be paid both on the principal and on accumulated unpaid interest Down Payment: a cash payment made to the lender toward the purchase of property Equity: the difference between the current market price of a home and the mortgage balance Fixed rate mortgage: a mortgage in which the interest rate remains the same for the life of the loan Interest rate: the cost of money that is borrowed, which is usually a percentage of the borrowed amount Mortgage: a loan used to purchase property Principal: the amount of money borrowed Truth in Lending Act: a regulation by the federal government that requires uniform methods for computing the cost of credit and disclosing credit terms Variable rate mortgage: a mortgage in which the interest rate changes during the life of the loan PwC Page 5 of 17

6 Sources Background information and vocabulary adaptations based on information from: *Council for Economic Education 2011 Survey of the States Information adapted from Cost of Living Reality Check: Vocabulary adapted from Investopedia: BankRate Mortgage Basics: Vocabulary and information adapted from Federal Reserve Pre and Post Assessments Before beginning the lesson, facilitators should introduce themselves and distribute the Pre-Assessment to the students. If time allows, consider conducting a mini icebreaker before the Pre-Assessment. Note: It is highly recommended that facilitators read the questions aloud to the students and encourage students to select answers as they move through the questions. Reassure the students that the assessments are not graded tests or quizzes, and they do not need to put their names on the assessments. The assessments are a tool to measure classroom comprehension of a given module and gauge effectiveness of instructor delivery. Collect the Pre-Assessments once completed. Facilitators should teach the lesson to the students and administer and collect the Post-Assessment at the end of class, keeping in mind the same considerations outlined above. Again, students do not need to put their names on Post-Assessments. Lesson activities Greeting Say: Hi everyone. My name is. I am happy to be here working with you today. Today we are going to spend some time talking about the decisions people must make when deciding whether to purchase a house. Some people might think that they should take any risk to own a home, but as you ll soon see information must be weighed carefully before making a final decision. Activity A Pros and cons of home ownership (10 minutes) Materials Class/group Chart paper or white/chalk board Markers Ask: How many of you plan on moving into a place of your own someday? PwC Page 6 of 17

7 Scan room for hands. Ask: When you first move out, do you think you will buy or rent? Why? Select several students to share ideas. Say: There are many factors to take into account when deciding whether to buy or rent. Divide students into groups of 5 or 6 students each. Assign each group one topic below. Depending on the number of groups, some groups may be assigned the same topic. Benefits (pros) of owning a home Drawbacks (cons) of owning a home Benefits (pros) of renting Drawbacks (cons) of renting Ask: Discuss the topic assigned among your group. We will then write your thoughts on the board. Write table on board. Select one or more representatives from each group to write ideas on board. Several students can be writing at the same time. (Sample answers are provided below) Renting Home ownership Pros Cons Pros Cons Easy to move if needed Might be less expensive Landlord must pay for fixes Rent could increase No build-up of equity May be forced to move You own it and can make changes Will eventually be paid off Build equity Could write off interest on taxes Responsible for all fixes Expensive Difficult to move Tough to come up with down payment Say: There are many reasons for and against renting and buying. One factor to consider is affordability. Let s take a look at what you might be spending in rent or on a house payment. Activity B Affordability (5 minutes) Materials Class/group Poster for Recommended Monthly Expenses* Poster for Home Equity* Handout A Key (1 copy for the facilitator) PwC Page 7 of 17

8 ** Note: If these posters can t be printed on paper larger than 8 ½ by 11, the facilitator may save them on a flash drive and display them on an overhead projector. Student (one per each student) Handout A Calculator Ask: What percent of monthly income do you think should be spent on rent or a house payment? Share your answer with the person sitting next to you. Display poster for Recommended Monthly Expenses to students. Say: Here is a circle graph showing recommended percents for monthly expenses. (Point out several different categories to students.) Of course every family is different, but the biggest expense on this chart appears to be housing. It is generally recommended that no more than 30% of monthly income be spent on a house payment or rent. Ask: If your monthly income is $8,000, what is the greatest amount you should spend on a monthly house payment or rent? Use your calculator to calculate this with me. Write on board: $8, Say: Show your calculator to the person sitting next to you and compare answers. Pause for a moment. Say. So 8,000 times 0.30 is $2,400 for monthly house payments. Say: Now let s look at affordability in a different way. If a monthly house payment or rent is $1,850, what is the least amount of income you should have? Write on board: Let x = monthly income. Then 0.30x = 1,850. Say: Calculate this individually then show your calculator to the person sitting next to you and compare answers. Pause for a moment. Say: To figure out the minimum income, divide both sides of the equation by 0.30 to isolate for X. The left side cancels out to X. On the right side, we have 1,850 divided by 0.30 so X equals $6,167 per month. So if your monthly payment is $1,850, you should be making at least $6,167 each month. Say: We ve been discussing monthly payments but what about the total price of a house? Houses can cost anywhere from $80,000 to millions of dollars. (Facilitator: insert appropriate range for area.) Very few people have the money to purchase a home outright. In these cases, the buyers will obtain a mortgage. A mortgage is a loan used to purchase property. Let s start keeping track of some definitions. Say and Write: A mortgage is a loan used to purchase property. Distribute Handout A to each student. PwC Page 8 of 17

9 Say: Use this chart to write down definitions and notes about each term as we discuss them. You will use this information later in the lesson when you have to research your own mortgage. Say: Both renting and buying require a monthly payment. Buying will probably mean obtaining a mortgage and a mortgage usually requires a down payment. Write Down Payment on the board. Say and Write: A cash payment made to the lender toward the purchase of property Say: The standard down payment usually required by a lender is 20% of the purchase price of the home. Ask: How much of a down payment would a lender require for a home that costs $300,000? Write 300, on the board. Say: Calculate the down payment and compare answers with a person sitting near you. Say: As most of you came up with, a 20% down payment on a $300,000 home comes to $60,000. The remaining amount is the amount you must borrow, which is called the principal. Write Principal is the amount borrowed on the board. Direct students to check their summary page (Handout A) to see if they have information written down about the down payment and principal. Say: A bank may allow a buyer to make a lower down payment. But this means the buyer will have to pay PMI or Private Mortgage Insurance. This insurance is paid by the buyer to protect the lender in case the buyer can t make the mortgage payments. Lenders usually require a homeowner to keep paying PMI until there is a certain percentage of equity in the house. Show poster of Home Equity. Say: Let s look at equity for a moment. Equity is the difference between the current market price of the home and the mortgage balance. Equity is basically a measure of how much of a house the homeowner owns. Point to the first stacked bar. [Value Equals Sales Price] Say: So if you purchase a house for $300,000 and put a $60,000 down payment, then your equity is $60,000. Point to the second stacked bar. [Balance of Mortgage Decreases] Say: Let s say the value of the house remains at $300,000. As you pay off the principal of the mortgage, the mortgage balance decreases and the amount of equity increases. This is a good thing. Point to the third stacked bar. [Value of Home Increases] Ask: Can anyone tell me what happened with this third bar? Discuss the answer with a person sitting near you. Select several students to share ideas. PwC Page 9 of 17

10 Say: If the value of the home increases, the mortgage balance won t increase. Only the equity will increase. That s good for the homeowner. Point to the fourth stacked bar. [Value of Home Decreases] Ask: What happens when the mortgage balance stays the same but the value of the home decreases? Tell the person next to you what you think. Say: If the value of the home decreases, the equity decreases. This is not good for the homeowner. In fact, it is possible for the value of the home to be less than the mortgage price. This is commonly referred to as being upside down on a mortgage. The homeowner is stuck because even selling the house will not provide enough money to pay off the mortgage. Say: So you ve weighed the pros and cons of renting and buying and you ve figured out how much of a house payment you can afford. Let s say you ve also saved very well and you have what you think might be a sufficient down payment. Is it time to start looking for a house? Say: Not yet! Before you start shopping for a house, you need to understand more about a mortgage. The monthly payment and down payment are parts of a mortgage, but there are other costs. Let s take a look! Activity C Shopping for a Mortgage (12 minutes) Materials Class/group PowerPoint Presentation Shopping for a Mortgage Student (one per each student) Calculator Say: What are the main components of a mortgage? (Pause.) The interest rate, required down payment, length of mortgage, and principal borrowed all have a great impact on the monthly payment and total cost of the loan. This information will all be provided by a lender, so it s best to talk to a lender and figure out what you can afford before you go looking for a house. A sure path to disappointment is to find the perfect house but not be able to afford it. Begin PowerPoint presentation. Progress PowerPoint to Slide 1. Say: Let s begin shopping for a mortgage. Progress PowerPoint to Slide 2. Say: Ahh you think you ve found the area in which you d like to live. Houses are about $300,000, but prices vary quite a bit based on the amount of land, the location in the neighborhood, and upgrades inside. But before you spend all your time looking for a house, you need to first determine if you can afford to live in this neighborhood. Let s go shopping for a mortgage. Progress PowerPoint to Slide 3. PwC Page 10 of 17

11 Say: You have researched and found a lending institution that offers three common mortgages: a 30 year fixed, a 15 year fixed, and a 5/1 ARM. Let s talk about the differences between the three mortgages. Use your summary page to jot down notes to help you remember. Say: A fixed rate mortgage means the interest rate stays the same for the entire mortgage. This is important because the monthly payment will stay the same. Ask: What are the benefits to having a monthly payment that stays the same? Think about it, then share your idea with the person next to you. Select several students to share ideas with the whole class. Say: A fixed payment is nice because you can more easily budget your expenses. If interest rates go up in later years, your house payment will remain the same. Say: A variable rate mortgage means the interest rate will start out low in the first few years, then it can go up or down for the remainder of the mortgage. Variable rate mortgages are also called Adjustable Rate Mortgages or ARMs for short. Progress PowerPoint to Slide 4. Say: Let s take a quick look at these variable rate mortgages. Click to animate each bullet. Select 1 or more students to read bullets on slide. Ask: What might be some of the benefits to a variable rate mortgage? Again, share your ideas with the person next to you. Select a few students to share ideas with the whole class. Say: The much lower payment at the beginning of the mortgage can be helpful to people who just starting out. However, getting a variable rate loan means you must be prepared to make much higher payments later on. If your income is not expected to go up, it may not be a good idea to get a variable rate loan. For this lesson, we will concentrate mostly on fixed rate loans. Progress PowerPoint to Slide 5. Say: Now let s look at the interest rates. There are two columns here, one for rate and one for APR. APR stands for annual percentage rate. The APR is a rate that includes all costs of the loan. Be sure to write this down on your summary page. Pause so students can write. Ask: Compare the APR and the interest rate for these mortgages. What do you notice? Select 1-2 students to share ideas. Say: You might have noticed that in each case, the APR is higher than the interest rate. This is because there are other costs associated with a loan in addition to the interest! These costs refer to the closing costs of a mortgage. PwC Page 11 of 17

12 Say and Write: Closing costs are all the costs associated with a mortgage. They can include fees, taxes, insurance, and many other things. Say: Why is the APR shown in a mortgage advertisement? It is required by law! Some lenders advertise mortgages with very low interest rates and then charge thousands of dollars in additional fees. Home buyers would get confused and think they were getting a better deal when they really aren t. The federal Truth in Lending Act requires all lenders to state the APR so consumers can use this as a comparison. Say: Take a moment now to look at what you have written down for on your summary page. Show the page to a few people near you. If you ve left something out of your notes, be sure to write it down now. Progress PowerPoint to Slide 6. Say: The next column mentions points. A point is often referred to as an origination fee for a mortgage in other words, a fee associated with beginning a mortgage. There are other points that can be purchased to obtain a lower interest rate. But for now, we are looking at points that are the fees of a mortgage. One point is equal to 1% of the principal borrowed. Let s take a moment to see what the costs of these points will be. Ask: Use the same example from the last activity. You are purchasing a $300,000 house and have saved up a down payment of $60,000. You will be borrowing $240,000 and paying points. Let s calculate the cost of the points. Say: The cost of the points for this loan is $240,000 times 1.250%. Remember to write the percent as a decimal before multiplying. Write on board: $240, = $3,000. Say: I hope you didn t use all of your savings on the down payment! You will need another $3,000 to get this mortgage. And that s not all. The bank might require mortgage insurance and other fees. It s important to ask questions and pay attention to the APR when shopping for a mortgage. Progress PowerPoint to Slide 7. Say: Now we move on to the monthly payment. This is the number most people are concerned with when they shop for a mortgage. After all, the monthly payment is a good indication of whether you can afford the home. Most lenders check that your monthly payment is no more than 30% of your monthly income. If it is a higher percentage, you may not be eligible for the mortgage Ask: Looking just at the monthly payment, how many of you would choose the 30 year fixed? The 15 year fixed? The ARM or adjustable rate mortgage? Count hands raised for each situation. Say: Now share your choice with the people in your group. Discuss the pros and cons of each choice. Be ready to share the ideas with the class. Pause for 1 minute group discussion. Select several students to share ideas. Note: Be sure to discuss the fact that the monthly payment of the ARM shown is guaranteed for only 5 years. After that, the loan amount can go up every year. Point out that if the buyer s income does not rise substantially in the PwC Page 12 of 17

13 next 5 years, there is a good chance the buyer could end up not being able to make the payments. Remember, there are no guarantees in the future. An adjustable rate mortgage can be a good decision if you have a solid plan for the future. Progress PowerPoint to Slide 8. Ask: There is something missing from this advertisement. There is no column that states the total cost of the interest you will be paying. To calculate that you need to know a little bit of math. Write on board: Total interest = monthly payment number of payments principal Say: Just multiply the monthly payment times the number of payments, and then subtract the principal. Let s use the principal amount of $240,000. Direct half the class to calculate the total interest for the 15 year fixed mortgage and the other half to calculate total interest for the 30 year fixed mortgage. Pause for students to calculate. Progress PowerPoint to Slide 9. Say: Let s take a look at a comparison. The total interest for the 15 year fixed is $55,740. The total interest for the 30 year fixed is $159,960. That s over $100,000 in savings by paying a bit more each month and getting a shorter loan. Ask: I did not ask anyone to figure out the total interest on the adjustable rate mortgage. Why? Select 1 student to respond. Animate objects so question marks revealed. Say: There is no way to determine the amount of interest you will pay on an adjustable rate mortgage until after the mortgage is complete! The interest rate will go up or down based on things that haven t happened yet. So there is some risk involved when you sign up for that adjustable rate mortgage. You really don t know what the cost will be! Say: Here s one more important thing to remember about a mortgage. Although you will look at your income and expenses to determine how much of a monthly payment you can afford, it is up to the lender to decide whether or not you qualify for a mortgage. So you may think you can afford a $1,100 payment but the bank or lender may disagree. On the other hand, a lender might tell you that you qualify for a larger mortgage than you think you can afford. It s tempting to take out the larger mortgage for the better house, but don t do it! You know your finances best. Many people have ended up losing their homes to foreclosure because they let the lender decide what they could afford rather than making their own decision. Activity D Reading an amortization table (5 minutes) Note: If running short on time, consider skipping this activity and providing an overview of how to read an amortization table. Materials Class/group Handout B Key (1 copy for the facilitator) PwC Page 13 of 17

14 Student (one per each student) Handout B Say: Let s say you are leaning towards choosing the 30 year fixed rate mortgage at 3.75%. You know your payments are$ 1,111 per month and you know the total cost of the interest is $159,960. But what if you decide to move before the 30 years is up? How much do you still owe the bank after 1 year? 10 years? 20 years? Distribute Handout B. Say: To answer these questions, you need to know something about an amortization table. An amortization table shows the amount of interest and principal that are paid off with each monthly payment. Take a look at the first month s payment. Note: Check a few students to be sure each student is looking at the correct line. Ask: How much of the first month s payment goes towards the principal? How much of the first monthly payment goes towards the interest? Discuss your answer with the person sitting next to you. Say: The amount of the monthly payment going towards the principal changes each month because the interest being charged is compounded. Compounding means that interest will be charged on the interest. Say: Notice this is only a part of an amortization table. Payment 1 through 12 are shown and then the last few payments of the mortgage. Notice also that the monthly payment is slightly different because the advertisement only rounded to the nearest dollar. Keep in mind that for a fixed rate mortgage, the payment will stay the same. If the pennies were rounded up, then the very last payment might be slightly less than the regular payments. Instruct students to answer the questions at bottom of Handout B. Pause for 1 minute so student can complete handout. Read answers from Handout B Answer Key. Say: Compare your answers to questions 3 and 5. Realize you ve paid over $13,000 in payments but have only paid off about $5,000 of the price of the house. Most of the payments in the first few years of a mortgage go towards interest. The amortization table can help show you why it is important to consider how long you will be in a house when you consider buying vs. renting. Say: You know quite a bit about mortgages now! It s time for you to start making some decisions. Activity E You make the decision (15 minutes) Materials Class/group Handout C Key (1 copy for the facilitator) Student Handout C (1 Mortgage Scenario for each person per group; for example, each student in Group A will have a Mortgage A worksheet.) PwC Page 14 of 17

15 Optional: Online access to mortgage payment calculator such as which contains extra payment scenario Divide students into six groups. Distribute one Mortgage Scenario to each person in each group. (Note: each student in Group A will have a Mortgage A worksheet; each student in Group B will have a Mortgage B worksheet, etc.) Say: You are going to look at several possible mortgages for purchasing the same house. Note: Facilitator can use home prices, interest rates, monthly payments, etc., from shaded area of answer key OR research home prices and interest rates for the area in which they live. If the facilitator chooses to use local home prices and interest rates then he/she must have a mortgage calculator (which includes the ability to make extra payments) available for classroom use OR have previously calculated all grey areas of the worksheets Write Home Price and Interest Rate on board. Say: I am now going to give each group their own home price and interest rate. Say and Write: Each group s home price and interest rate on the board. Note: If the facilitator has chosen to use local/current home prices and interest rates, he/she must have these figures prepared and give each group a slightly different figure. If the facilitator has chosen to use the calculations provided, then he/she can give each group their home price and interest rate from the shaded cells on the second page of the Handout C Key. Say: Fill in the price of house and interest rate on your worksheet. These spaces are shaded grey. If you have Mortgage C, be careful. You get a lower interest rate because you are going to pay some points. Now work with your group to calculate the down payment you will be making and determine the principal you will borrow. Walk from group to group to ensure that the students are calculating correctly. Say: Now we re going to share what each group calculated. Let s start with the group who has Mortgage A. Be sure to listen to the answers they give to my questions because your group s monthly payment might be the same! Ask: Group A: What is the principal to be borrowed? What is the interest rate? What is the length of the mortgage? Select one student in Group A to provide information. Ask: Which other groups have exactly the same principal, interest rate, and length of mortgage? Scan room for hands. [Groups E and F will have the same information.] Say: Here is the monthly payment for those mortgages. Be sure to write this down. Note: Facilitator begins entering information in mortgage calculator for students to see OR facilitator reads previously calculated monthly payments from Handout C Answer Key. PwC Page 15 of 17

16 Say: Now let s figure out the monthly payment for Mortgage B. Note: Facilitator repeats using mortgage calculator OR reads from previously calculated worksheet. Repeat with Mortgages C and D. Say: Now take a moment to calculate the total interest you will have to pay for each type of mortgage. Groups E and F will not be able to do this. I will give you this information. Note: Facilitator can use a mortgage calculator OR read from previously calculated worksheet to state total interest and actual length of mortgage to Groups E and F. Say: Now, with your group, calculate the Total Cash Upfront you need for your mortgage. The group with Mortgage C will have to include the points too. Pause 1 minute for students to calculate. Say: Your mortgage worksheet should now be completely filled in. Take a moment to compare your information with the group next to you. Note: While students are sharing, facilitator will write this table on the board: Cash Upfront Monthly Payment Total Interest Actual length of mortgage Mortgage A Mortgage B Mortgage C Mortgage D Mortgage E Mortgage F Say: I need a representative from each group to fill in the categories. Select one student from each group to come to the board. Pause for student to write this data. Say: Think about which mortgage you might choose and why. Share your answer with the people in your group. Pause for 1 minutes so students can discuss. Say: There are many reasons for each type of mortgage. Some people have less cash available for a down payment. Others might have income that fluctuates so they can make extra payments at some time. Some people might decide to pay some cash upfront to get a lower interest rate. However, each homebuyer must carefully consider all the options and the consequences of each before obtaining a mortgage. That s part of the process of becoming a successful homeowner. Closing reflections (5 minutes) Say: Buying a home starts with considering the pros and cons of home buying, deciding whether a house payment is affordable, and finally shopping for the right mortgage. PwC Page 16 of 17

17 Say: Before I leave, I d like you to think about some of the things you learned today that surprised you. I ll give you 30 seconds to think and then please share it with 1 or 2 people sitting near you. Pause for thinking time. Ask: Would anyone like to share with the class what was said? Select 2 volunteers (or more, depending on time remaining). Say: Thank you for all of your hard work. Hopefully this time we ve spent together has given you some knowledge about the questions to ask and the options you have when choosing a mortgage. This lesson could save you thousands of dollars! Evaluation/assessment of student learning During lesson/in-class Students calculate an appropriate house payment when given monthly income and vice versa. Students understand and use the terms of a mortgage including but not limited to principal, fixed interest rate, variable interest rate, APR, points, and total cost. Students discuss pros and cons of an adjustable rate mortgage. Students use an amortization table to determine the payoff balance after a specified number of years. Students use a mortgage calculator to compare monthly payments and total cost when principal, interest rate, and/or mortgage length changes. Ideas for post-lesson assessments Students take a quiz on key terms from the lesson: mortgage, principal, down payment, fixed and variable interest rates, APR, points, closing costs, and PMI. When given monthly income, students calculate the appropriate monthly payment and vice versa. Students use a mortgage calculator with advanced features to determine how increasing a monthly payment and/or making extra payments can affect the total cost of the loan. Extensions/enrichment Students research average monthly salary for a type of work. From that salary, students calculate appropriate monthly payment and find a house and mortgage terms that will result in that payment. Students can write about the pros and cons of the mortgage they have chosen. Students interview home owners and renters to expand the list of pros and cons for home buying and renting. PwC Page 17 of 17