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Session 6: Introduction to Mortgages



Session 6: 

Introduction To Mortgages


Fun Entrepreneur Icebreaker


2 Truths And A Lie:  Students need to guess the lie and will earn a point for each correct answer.


 

Help students understand the concept of a mortgage as a fundamental part of buying a home.


1. What is a Mortgage?


A mortgage is like a special loan, but it's specifically for buying a house or property. Imagine you want to buy a house, but it costs a lot more money than you have saved up. That's where a mortgage comes in. You can go to a bank, and they will lend you the money to buy the house. But, just like any other loan, you have to pay it back over time, with some extra.


2. Basic Terms in Mortgages:


  • Principal: The principal is the total amount of money you borrow from the bank to buy your house. For example, if the house costs $300,000 and you have $60,000 to pay upfront, you would borrow $240,000 from the bank. That $240,000 is your principal.   You could choose a 15-year payback term or a 30-year payback term.  A “30 Year Conventional” loan is the most popular which keeps monthly payments affordable. 

  • Interest Rate: When you borrow money, the bank doesn’t just let you use it for free. They charge you extra money over time, which is called the interest. The interest rate is a percentage of the principal that you have to pay every year. So, a lower interest rate means you pay less extra money.

  • Down Payment: This is the part of the home’s price that you pay upfront before you get the mortgage. It's like if you're buying a $20 game, and you pay $5 from your pocket, and then ask someone to lend you the rest ($15). In the case of a house, the down payment is usually a percentage of the home’s total cost.


Summary: Understanding a mortgage is a big part of knowing how to buy a home. It involves borrowing a large amount of money and paying it back over many years. The principal, interest rate, and down payment are all important parts of this process.


CONGRATULATIONS!


You have been approved for the mortgage!  Here's what happens next in the process.  


1. Home Inspection


Before finalizing the purchase, it’s common to have a professional inspect the home. This person checks for any problems with the house, like plumbing issues, electrical problems, or structural damage. 


Class Activity:  HOME INSPECTORS

Students pretend to be home inspectors and list what they would check in a house.  Let’s go around the classroom and hear from the students what they may inspect inside or outside the house.  


2. Appraisal


The bank will want an appraisal of the house. This means a professional will determine the value of the home to ensure it’s worth the money being lent.


3. Finalizing the Mortgage


With the inspection and appraisal done, it's time to finalize the mortgage. This means agreeing to the terms of the loan and understanding the monthly payments, interest rate, and duration of the loan.


4. Closing


This is the final step. 'Closing' is when you officially complete the purchase. It involves signing a lot of paperwork, paying “closing costs” (like attorney fees, title insurance, etc.), and finally getting the keys to the house.


5. Moving In


Now that they officially own the house, it's time for them to start planning their move. After they've settled in, they can celebrate their new home by throwing a housewarming party with friends and family.





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