Oct 13, 2024

Question of the Day: How much more in interest does a consumer with a low credit score pay when it comes to a home loan (mortgage)?

It's why managing your credit score is so important and the lesson on credit scores could be worth six figures in savings. 

Answer: $321 per month or $115,292 over a 30 year period which is the difference between the highest credit score (760-850) and the lowest (620-639). 

Data as of 7/29/24:

Note: Assumes a thirty year fixed rate mortgage for $300,000 over 30 years 

--------

Questions:

  • What do you notice about the relationship between a credit score and the interest rate on a mortgage? 
  • Why do you think that lenders charge different interest rates based on a borrower's credit score? 
  • What do you think is one way to earn a good credit score? 

Here are the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (Bankrate):

Although it’s up to specific lenders to determine what score borrowers need to receive the lowest mortgage interest rates, a difference of just a few points on your credit score can sometimes affect your monthly payments substantially. For example, on a $300,000 mortgage, the difference in principal and interest payments between a 7 percent interest rate and a 6.5 percent rate is $99 per month. That comes out to more than $35,000 over the course of a 30-year mortgage term.

-----------

NGPF's Arcade Game, Shady Sam, helps students understand credit from a lender's perspective. 

 

 

 

About the Author

Dave Martin

Dave joins NGPF with 15 years of teaching experience in math and computer science. After joining the New York City Teaching Fellows program and earning a Master's degree in Education from Pace University, his teaching career has taken him to New York, New Jersey and a summer in the north of Ghana. Dave firmly believes that financial literacy is vital to creating well-rounded students that are prepared for a complex and highly competitive world. During what free time two young daughters will allow, Dave enjoys video games, Dungeons & Dragons, cooking, gardening, and taking naps.

author image More by Dave right solid arrow
Mail Icon

Subscribe to the blog

Join the more than 12,000 teachers who get the NGPF daily blog delivered to their inbox: