Life Stages Planning


Home ownership is a major purchase and is often one of the largest investments you will make during your lifetime. Although everyone’s circumstances will determine if buying a home makes good financial sense, we aim to provide you with some things to think about when determining if now is the time to buy, and how much house you can actually afford.

  Terminology to Know  


Fixed Interest Rate Loans

  • Rate remains the same from the start of repayment until the loan is paid off in-full

  • The most conservative borrowing method

  • Ideal during a rising interest rate environment

Adjustable Rate Mortgages (ARM)

  • The borrower gets a discounted fixed rate for an initial period (3, 5 or 7 years) and then the rate annually adjusts up or down based on a benchmark used by the bank (prime, LIBOR)

  • The interest rate adjustment has a limit in terms of how low or high the rate can go year to year, as well as an overall maximum cap and minimum floor in order to prevent things from getting out of control

  • Ideal during a flat or declining interest rate environment

Variable Interest Rate Loans

  • Like an ARM, but not the same 

  • The interest rate adjusts up and down on a monthly basis - often tied to the prime lending rate between banks

  • Most aggressive option for borrowing

  • Ideal during flat or declining interest rate environment

Principal – the balance that is owed on your loan


Interest Rate – the cost of borrowing, charged as a percentage of the balance owed

APR – the cost of borrowing plus the additional fees incurred to obtain your loan

Loan Term

  • Number of years it takes to back your debt

  • Most common mortgage payment periods are 30 years and 15 years

  • Shorter time periods come with higher payments, but the borrower gets a larger percentage of each payment applied to the principal balance

  • Long-term loans carry lower payments, but are significantly more expensive because much of the payment in the early years is interest

  Home Affordability Benchmarks  

  1. Housing Payments = 28% or less monthly gross income

    • Includes: mortgage payment, property taxes, homeowners insurance, private mortgage insurance (PMI), HOA dues, CDD fees

    • Example: $100,000 gross income --> max housing payment = $2,333/month

  2. Debt-to-Income Ratio (DTI) = 36% or less monthly gross income  

    • Includes: housing payment, credit cards, cars, and student debt

    • Example: $100,000 gross income --> max DTI = $3,000/month

  3. Other Helpful Linked Resources:


  Types of Loans  

Differentiating Features

For Who?

Rate Type

  • Lowest down payment at 3%

  • No PMI with 20% down

  • PMI automatically drops off at 78%

Borrowers with good credit & higher income

Fixed, Adjustable

  • PMI is mandatory

  • Therefore, borrowers who can put 20% down should avoid this option

Borrowers with low to average credit & lower income

Fixed, Adjustable

  • $0 down payment

  • No closing costs

  • No PMI


Fixed, Adjustable

  • Fixed payments over a specified period of time

  • Best for debt consolidation
    and one-time projects

Borrowers who prefer a fixed payment and are worried about rising interest rates


  • Interest only payments for better cash flow flexibility

  • Best for debt consolidation and multiple projects

Borrowers who want payment flexibility and the ability to borrow on an as-needed basis



  What Affects Your Housing Payment  

Private Mortgage Insurance (PMI) - An insurance premium that your lender may require you to pay to protect them in the event the borrower defaults on the loan.

  • Lenders typically require PMI if your down payment is less than 20%.

    • For example, if you put down 20% you will not have to pay PMI, but if you put down 10%, you will have to pay PMI until your equity in the home reaches 20%.

    • It is important to note that the Homeowners Protection Act requires lenders to automatically cancel PMI when your equity in your home equals 22%. In order to avoid paying PMI for that extra 2%, you are responsible for contacting the lender when your equity reaches 20%! It doesn’t seem like huge difference, but why pay more when you don’t have to?

  • PMI premiums can range from .55% - 2.23% (average = 1%) of the original loan amount per year.

    • PMI premiums are usually added to your monthly mortgage payment. However, some lenders may require paying PMI out-of-pocket as a lump sum at closing, or a combination of an upfront payment followed by future monthly payments.

  • Factors that determine your PMI premium:

    • Loan amount – Since PMI is paid as a percentage of the loan amount, the more expensive the house the higher the cost of PMI.

    • Credit score – PMI is like most insurance policies, it’s based-on risk, the lower your credit score, the greater the risk, which increases PMI.

    • Debt-to-Income ratio (DTI) – This is a ratio that compares your total monthly debt payments to your total monthly gross income. Like credit score, it is a measure of risk taken by the lender, a higher DTI results in a higher PMI premium.

    • Loan-to-value ratio (LTV) – This is a ratio that compares your loan balance to the market value of your home and is usually stated as a percentage. In other words, the smaller the down payment, the higher your LTV ratio. A higher LTV will result in a higher PMI premium.

  • How to Remove PMI

    • Refinance your home – if you refinance your home and you new mortgage is less than 80% of the home value, you can contact the lender to cancel your PMI premium. Before doing so it is important to calculate the cost of the refinance and the cost of remaining PMI payments to make sure it makes sense

Credit Score Ranges

  • Bad: 300 – 629

  • Fair: 630 – 689

  • Good: 690 – 719

  • Excellent: 720 – 850

  • Government regulation requires that nationwide credit reporting agencies provide you with an annual free credit report upon your request. Most credit card companies have features that keep you up to date with your credit score, and there are plenty of online tools that offer free credit reports. We advise caution when using third party websites that aren’t found through the FTC website.

Property Taxes - are taxes based on the current market value of your home, including land. The county will usually collect property taxes on a semi-annual basis by assessing an annual mill rate.

  • Jacksonville Area Property Tax Rates (as of Oct. 2019)

    • Ponte Vedra = 1.088%

    • Nocatee = 1.159% 

    • St. John’s County = 1.088%

    • Duval County = 1.047%

Homeowners (HO) Insurance- A type of insurance that generally covers damage to the property. In addition, liability and legal responsibility towards other people are covered for any injuries and property damages caused by the policyholders, their families, and their pets.  

  • Quick Method for Estimating the Cost of Your Homeowner’s Policy

    • Multiply 0.35% by the home value

    • Example - $400,000 home à estimated HO policy cost = $1,400

  • 4 Essential Types of Coverage Included in a Standard Policy

    • Structure of home

    • Coverage of Personal Belongings

    • Liability Protection

    • Additional Living Expenses

  Planning for Home Repairs  

Average Cost of Common Home Repairs:

  • Roofing This can be a major cost down the line, so making sure that you are aware of the condition of the roof before you purchase the home is important. Also, be sure to ask how a new roof was installed, sometimes to save money, homeowners may decide to put in a new roof without removing the old one. This will result in extra costs for you since the roofers will now have to remove 2 layers of roofing before that can install a new one.

    • Repair a roof = $650

    • Install a new roof = $6,600 

    • Note, that these costs can vary considerably, depending on type of material is used and the size of the home

  • Painting exterior / interior of home = $2,500 / $1,650

  • Water Heater

    • Install = $900

    • Repair = $500

  • Plumbing Pipes = $1,100

  • A/C Units

    • Install = $5,200

    • Repair = $300

  • Decks

    • Build a deck = $7,000

    • Repair a deck = $1,400

  • Tree / Shrub Removal = $650


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