People shouldn’t solely rely on their financial institutions to financially plan and manage their mortgage. Homeowners need to become educated consumers and learn what conditions of a mortgage are within their control.

Amount to Mortgage Mortgage Term Interest Rate Amortization Period Monthly Payment Total Amount Paid for House $380,0005 years6%25 years$2510$753,000 Amount to Mortgage Mortgage Term Interest Rate Amortization Period Monthly Payment Total Amount Paid for House $380,0005 years6%20 years$2794$670,560 By paying off your mortgage 5 years sooner, you save $82,440!

PRE-APPROVED MORTGAGE: The maximum amount that can be borrowed from a lending institution to purchase a house. SEMI-MONTHLY PAYMENT: Half the monthly payment is paid twice a month, usually on the 15 th and 30 th of each month. ACCELERATED BI-WEEKLY PAYMENT: Half the monthly payment is paid every two weeks. The equivalent of one extra monthly payment is paid each year.

 What is one advantage and one disadvantage of making monthly payments?  ADVANTAGE: Mortgage gets paid off slower compared to making more frequent deposits (e.g. bi-weekly, accelerated weekly)  DISADVANTAGE: A smaller percentage of your income goes to paying off mortgage, so more money for other things in your life.

 Comparing annuities with different lengths of time (terms). Compare the 2 investment plans below, and the questions that follow.  For the second investment plan, you are investing twice as much for half the time Will they both return the same amount, or different? Which one will be more if different? INVESTMENT PLAN 1 Monthly Investment: $40 Start: Now Time Period: 30 years Annual Interest Rate: 6% Compounding Period: Monthly INVESTMENT PLAN 2 Monthly Investment: $80 Start: 15 years from now Time Period: 15 years Annual Interest Rate: 6% Compounding Period: Monthly

INVESTMENT PLAN 1 Monthly Investment: $40 Start: Now Time Period: 30 years (360 months) Annual Interest Rate: 6% Compounding Period: Monthly MONTHDEPOSITINTERESTTOTAL 0$40$40 x 0.06 = $2.40$ $40$82.40 x 0.06 = $4.94$ $40$87.34 x 0.06 = $5.24$92.58 INVESTMENT PLAN 2 Monthly Investment: $80 Start: 15 years from now (180 months) Time Period: 15 years Annual Interest Rate: 6% Compounding Period: Monthly MONTHDEPOSITINTERESTTOTAL 180$80$80 x 0.06 = $4.80$ $80$ x 0.06 = $9.89 $ $80$ x 0.06 = $15.28 $ Let’s look at the first three months of each investment to see if we can get an idea of the growth of the annuity.

What happened?? Did Investment 2 not grow at all?

 Even when we zoom in on where Investment 2 starts (T = 180 months), we still see no change relative to Investment 1!

 It’s not to say that Investment 2 doesn’t increase – it will, exponentially, but not until after the 30 year time frame in which you leave it untouched.  15 years makes a HUGE difference when it comes to investing  TIME = MONEY

 p. 435 #3, 4