Please ensure Javascript is enabled for purposes of website accessibility

3 Mortgage Facts That Might Surprise You

By Nathan Hamilton - Apr 11, 2017 at 9:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

How many caught you by surprise?

Many Americans could benefit from a crash course in personal finance 101.

In fact, more than a third of Americans surveyed by CNN Money weren't familiar with what APR, or annual percentage rate, referred to. If you're in that same boat, it's OK. We Fools are here to help you nail down the essentials.

In the video segment below, Motley Fool analysts Nathan Hamilton and Kristine Harjes talk about three other mortgage facts you may not have known.

Kristine Harjes: Here at The Motley Fool we've been doing a ton of research into mortgages lately and we came across some extremely surprising facts while we were doing this. We want to share three of them with you today, the first of which I think is absolutely shocking.

Nathan Hamilton: Yeah. So if you look at it right now mortgage rates are around 4.3%. If you go back to 1981, the average mortgage rate was 18.4% or [18.]5%, double digits.

Harjes: That is absolutely insane. That's not even like barely double digits. That's over 18%.

Hamilton: Yeah. And even, if you go back to 2016, rates were below 4%, and even since they've come up to above 4% now, it's still a fraction of what they were in 1981.

Harjes: Right. So just to put that with a little bit of context, give some numbers behind it, a $200,000 mortgage today at 4.3% would be [a] $990 payment monthly. But you look at an 18.4% or [18.]5% mortgage and all the sudden that jumps from $990 to $3,088.

Hamilton: Yeah, obviously the cost of ownership, homeownership has come down quite tremendously in the past few decades.

Harjes: That is incredible. So what was the second surprising fact that we wanted to share?

Hamilton: Yes, so this is more of a tip more than anything, but when you're looking at getting a mortgage you'll want to focus on what they call the mortgage APR versus the teaser rate or interest rate. What the difference is, is mortgage APR is what you actually pay each month. It takes all the cost, all the fees, rolls it into your total APR number. Interest rate is a teaser. It doesn't include fees. It doesn't include the actual reality of what your monthly mortgage payment is going to be.

Harjes: And the difference can sometimes be pretty substantial between 0.5 and 0.75 percentage points.

Hamilton: Yeah. Essentially as you look at it, the less you're putting down typically, the greater the range from what your APR is going to be to the interest rate.

Harjes: Interesting. One more surprising fact that we wanted to share with our listeners today is that the average mortgage debt for home owners is $168,000.

Hamilton: Yeah, which is interesting if you put it in context because the average new mortgage is $309,000. This was as of early March, so it shows that people are paying down their mortgages and so forth, and right now the average outstanding mortgage is $168,000 --

Harjes: Very interesting.

Hamilton: Which is still a good amount.

Harjes: Yep. If you're looking for more information about mortgages, head to fool.com/mortgages to get started finding a low rate, including access to highly rated lenders and our free guide, "Five Tips to Increase Your Credit Score Over 800."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.