True costs of a monthly mortgage

Infographic may make buyers think twice about down payment

By Inman News Feed
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Infographic may make buyers think twice about down payment

Tara-Nicholle Nelson
Inman News™

The whole idea of an infographic is to take a topic that is complex or difficult to understand via text, and to display it, with graphics and visuals, in a way that makes it simple to understand at a glance.

Given that overarching aim of the entire genre, it makes sense that many an infographic has been designed in an effort to demystify that indispensable phenomenon which holds the power to empower and imperil, while causing great obfuscation among homebuyers and homeowners alike: the home mortgage.

Unfortunately, many of the mortgage infographics are stunningly complex or utterly unhelpful in themselves. Some try to illustrate every evil of the subprime mortgage calamity and depict the sequence by which America's housing market fell.

Others they try to use tricky icons to make vivid the impacts of the recession on housing markets nationwide, which vary across cities and are so subject to the perspective of the beholder (i.e., what ails sellers exhilarates buyers) that they aren't easily boiled down to happy and sad faces (except at the extreme ends of the spectrum.

But I recently saw a very basic, educational mortgage infographic that took me back to the days when I first started selling real estate. I worked up a very basic flowchart of the homebuying process on my laptop that I used at my very first meeting with a client, to demystify the process, tackle some common misconceptions head on, and empower them to know what to expect.

People loved it so much that I would get calls from them, later in the process, saying that they would have been nervous but for the fact that they knew what was coming; even experienced buyers told me they learned things during that session that they had never known before, despite having bought several homes over several decades.

The infographic that put me in mind of those days -- and of the perennial cravings of smart real estate and mortgage consumers for clarity -- is a simple breakdown of the elements of a monthly mortgage payment.

Principal, interest, taxes and insurance -- stack up in blocks of color to comprise the total payment a borrower is required to make, and the graphic also provides a sample set of numbers for each element pegged to a $269,000 mortgage with a 20 percent down payment.

(The $269,000 amount seems random, compared to the current median existing-home sales price of $165,400 nationwide -- that median price statistic is according to the National Association of Realtors.)

On the other hand, the 4.54 percent interest rate upon which the graphic is based is quite close to today's prevailing 4.33 percent rate on a 30-year fixed-rate loan.

The graphic includes one additional module, providing a reality check for today's homebuyers and refiers who are low on cash or simply want to keep some in their pockets.

Down payments less than 20 percent flick on the PMI switch, meaning that lenders charge an extra, substantial monthly fee for private mortgage insurance. The aim? To both (a) incent borrowers to put more down, and (b) cover the cost of insurance against the additional risk of default that low-down loans present.

This graphic doesn't contain uber-sophisticated analysis, fancy clickable maps or interactive doodads, but it does offer mortgage consumers a simple breakdown of their mortgage payments. Its simplicity does bely the new clarity it might provide to some borrowers, whether novice or repeat.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   
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