This is an optional assignment for those interested in the process of buying a home or refinancing a home. If you are thinking about buying a home, what is your credit score (you should know this from the previous section)? Your credit score is an important tool that you should understand if you are planning on borrowing for a mortgage. If you already have a home and a mortgage, what are the costs of your current loan in terms of mortgage payment, private mortgage insurance (if applicable), and any other costs or fees? If interest rates have declined, would it be a good time to think about refinancing your home or moving from a variable-rate loan to a fixed-rate loan? You might even consider reducing the maturity of your mortgage. Remember the words of President Hinckley when he said the following:

I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads. . . for as long as 30 years. . . I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can. (“To the Boys and to the Men,” Ensign, Nov. 1998, 51)

Finally, if you are looking for a new loan or thinking about refinancing your home, it is important for you to be able to determine the effective interest rate of different fixed-maturity loans. The effective interest rate takes into account all the fees and expenses of buying a home. Learning Tool 19: Home Loan Comparison with Prepayments allows you to evaluate different loans with different fees and points. It also allows you to evaluate how many months of payments you would save by making additional prepayments of principal each month.