63 lines
3.0 KiB
Markdown
63 lines
3.0 KiB
Markdown
# 6
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## 6.1 Mortgage Loan
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### 6.1.1 Definitions
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- **Down payment: **a percentage of the total cost of the house paid at the time of purchase.
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- **Mortgage Loan (*principal*):** the money you borrow.
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- **Closing Costs:** fees and taxes paid to complete the purchase.
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### 6.1.2 Formulas
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- $𝑴𝒐𝒓𝒕𝒈𝒂𝒈𝒆 𝑳𝒐𝒂𝒏=𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 𝑷𝒓𝒊𝒄𝒆 – 𝑫𝒐𝒘𝒏 𝑷𝒂𝒚𝒎𝒆𝒏𝒕$
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- $𝑪𝒂𝒔𝒉 𝑵𝒆𝒆𝒅𝒆𝒅 𝒕𝒐 𝑩𝒖𝒚 𝒂 𝑯𝒐𝒎𝒆=𝑫𝒐𝒘𝒏 𝑷𝒂𝒚𝒎𝒆𝒏𝒕+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑪𝒐𝒔𝒕𝒔$
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### 6.1.3 Calculations
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- **Interest:**
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- **Fixed rate mortgages:** The same rate of interest is paid for the life of the loan.
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- **Variable rate mortgages:** The rate of interest is not guaranteed and may be increased or decreased.
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- **Mortgage Payment: **Most mortgages are repaid gradually over the life of the mortgage in **equal monthly payments**.
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- **Amortization Table:** It is a table that shows the monthly payments needed to amortize mortgage loans over different periods of time using different interest rates.
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- **Refinancing a Mortgage:**
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When you refinance a mortgage, you take out a new mortgage and use that money to pay off the old mortgage.
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## 6.2 Renting or Owning a Home
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- **Depreciation:** It is the ***loss in*** ***value*** of property caused by aging and use.
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- **Net Cost for a Home:**
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$ Total Expenses – Tax Reductions = Net Cost for the First Year$
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- **Costs of Property Rental:**
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Security deposit is a *one-time* payment in addition to their rent when they sign a lease, or rental agreement.
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## 6.3 Property Taxes
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- **Property taxes** are taxes on the value of real estate such as homes, business property, or farm land.
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The amount of property tax paid is based on the assessed value of a property.
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- $Amount to be raised by property tax = Total expense budget – Income from other sources$
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- **Tax Rates in Mills or Cents per Dollar:** $\frac{\$62}{\$1,000}=\frac{\$0.062}{\$1}$
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## 6.4 Property Insurance
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- **Homeowners Insurance:**
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- A policy that covers your home and protects you against other risks is called ***homeowners*** ***insurance***.
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- The amount for which your home is insured is called the ***face value*** of the policy.
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- Under ***replacement*** ***cost policies***, the insurance company will pay the cost of replacing your property at current prices.
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- **Premium:**
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The money paid to an insurance company for property insurance is the ***premium***.
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- **Renters Insurance Premiums:**
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If you rent a house or an apartment: You can buy a **renters policy** that provides nearly the same coverage as a homeowners policy except for loss of the dwelling and other structures.
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