I was scouring the interwebs lately for a financial education project I’m doing and I came across Sal Khan’s joint educational venture with Bank of America called www.bettermoneyhabits.com
There’s some very good stuff there, but I was drawn in particular to his “How does a mortgage work” video.
I happen to have this weird belief that everybody who takes out a mortgage (or car loan, or business loan, whatever) should be required – as a pre-condition of their borrowing the money – to build their own ‘loan spreadsheet,’ in order to learn the nuts and bolts of how it works. If you’ve programmed it into a spreadsheet, and calculated how the principal and interest gets paid every month, and how it amortizes, you gain insight into interest rates and cash flows that you can’t get any other way.
Anyway, I know this weird belief will not be implemented by any lender anytime soon, so the next best thing is to introduce people to pre-made spreadsheets on mortgages, and to walk them through the component parts. As a master teacher, Sal Khan is suited to do this very well. There are a ton of pre-made mortgage spreadsheet available online, but Khan Academy’s is as good as any.
Khan Academy makes available a pre-made spreadsheet under the “Fixed Mortgage Calculator” link here, that lets you input amounts, and fixed interest rates and even tax rates to calculate interest savings.
Also, I had no idea that Mortgage comes from Old French meaning Dead-Contract, since presumably the contract or title to the real estate gets killed off over time, eventually releasing the borrower from the lien. Fun!
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