Standard #: MA.912.F.3.14 (Archived Standard)


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Compare the total cost for a set purchase price using a fixed rate, adjustable rate, and a balloon mortgage.


Clarifications


Example: Find the total cost for a $225,000 mortgage for the following options:

a) 30 year fixed rate mortgage with a rate of 6.35 %
b) 3/1 ARM with a rate of 6.75% with a maximum adjustment of 2 points per year with a cap of 6 points for 30 years c) 10 year balloon mortgage with a 30 year amortization schedule with a rate of 5.5%

Next describe the benefits and detriments of each mortgage option.

General Information

Subject Area: X-Mathematics (former standards - 2008)
Grade: 912
Body of Knowledge: Financial Literacy
Standard: Loans and Financing - Become familiar with and describe the advantages and disadvantages of short-term purchases, long-term purchases, and mortgages.
Date Adopted or Revised: 09/07
Date of Last Rating: 06/07
Status: State Board Approved - Archived

Related Courses

Course Number1111 Course Title222
1200500: Advanced Algebra with Financial Applications (Specifically in versions: 2014 - 2015 (course terminated))
7921022: Access Economics with Financial Literacy (Specifically in versions: 2014 - 2015, 2015 - 2018, 2018 and beyond (current))


Related Resources

Lesson Plan

Name Description
Shopping for a Home Mortgage Loan

Students will analyze the data given to decide which type of loan they will buy. After selecting their options, students will estimate the first loan payment. FHA loans offer a better interest rate than conforming loans, but buying premium insurance is a requirement to qualify for an FHA loan, increasing the upfront cost of the loan. Fixed interest rate loans seem like the best choice because you have the same mortgage payment every month; however, adjustable rate loans offer a better interest rate and it has a cap on the interest rate.

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