Podcast
Questions and Answers
What should be done at the end of a lease?
What should be done at the end of a lease?
- Request a lower rent for the next lease
- Leave the apartment in the same condition as upon moving in (correct)
- Inform the landlord of any repairs needed
- Obtain a new rental agreement
Which step involves negotiating the price of a property?
Which step involves negotiating the price of a property?
- Find and Evaluate a Property to Purchase
- Determine Home Ownership Needs
- Price the Property (correct)
- Obtain Financing
What factor can lead to a lower interest rate on a mortgage?
What factor can lead to a lower interest rate on a mortgage?
- Having a longer loan term
- Opting for an adjustable-rate mortgage
- Choosing a fixed-rate mortgage
- Making a larger down payment (correct)
Why is it advisable to get renter's insurance?
Why is it advisable to get renter's insurance?
What is the first step in the home-buying process?
What is the first step in the home-buying process?
What is an advantage of renting a residence?
What is an advantage of renting a residence?
Which of the following is a disadvantage of renting?
Which of the following is a disadvantage of renting?
What is one advantage of renting a property compared to owning a house?
What is one advantage of renting a property compared to owning a house?
What is a financial benefit of buying a home?
What is a financial benefit of buying a home?
Which of these options represents a disadvantage of buying a home?
Which of these options represents a disadvantage of buying a home?
Which disadvantage is common to renting a property?
Which disadvantage is common to renting a property?
What is a key disadvantage of owning a new house?
What is a key disadvantage of owning a new house?
What is a potential inconvenience for renters mentioned in the content?
What is a potential inconvenience for renters mentioned in the content?
Which characteristic is associated with renting rather than buying?
Which characteristic is associated with renting rather than buying?
Which advantage is specifically associated with owning a previously owned house?
Which advantage is specifically associated with owning a previously owned house?
What is a common concern associated with buying a home?
What is a common concern associated with buying a home?
What is a disadvantage of owning a condominium?
What is a disadvantage of owning a condominium?
How does renting affect long-term financial commitment compared to buying?
How does renting affect long-term financial commitment compared to buying?
What should be verified before signing a lease for a rental unit?
What should be verified before signing a lease for a rental unit?
Which of the following is NOT an advantage of owning a new house?
Which of the following is NOT an advantage of owning a new house?
When renting, why is it advisable to talk to a lawyer about the lease?
When renting, why is it advisable to talk to a lawyer about the lease?
What is the total monthly payment Johnny will have for his mortgage?
What is the total monthly payment Johnny will have for his mortgage?
How much will Johnny need to pay as a down payment for the house?
How much will Johnny need to pay as a down payment for the house?
What percentage of Johnny's monthly income does the mortgage payment represent?
What percentage of Johnny's monthly income does the mortgage payment represent?
What is Johnny's total monthly debt before adding the mortgage?
What is Johnny's total monthly debt before adding the mortgage?
What is the monthly property tax Johnny needs to pay for the house?
What is the monthly property tax Johnny needs to pay for the house?
What is the total monthly housing expense, including property tax and insurance?
What is the total monthly housing expense, including property tax and insurance?
Does Johnny meet the bank's maximum housing expense ratio of 28%?
Does Johnny meet the bank's maximum housing expense ratio of 28%?
What is the maximum total monthly expense ratio that Johnny's bank allows?
What is the maximum total monthly expense ratio that Johnny's bank allows?
Which of the following is NOT part of the interior construction criteria during a home inspection?
Which of the following is NOT part of the interior construction criteria during a home inspection?
What criteria are considered under exterior construction during a home inspection?
What criteria are considered under exterior construction during a home inspection?
Which of the following factors is assessed in the interior design criteria for a home?
Which of the following factors is assessed in the interior design criteria for a home?
What is NOT included in the exterior facilities criteria for a home inspection?
What is NOT included in the exterior facilities criteria for a home inspection?
Which item is part of the interior construction criteria regarding windows?
Which item is part of the interior construction criteria regarding windows?
During a home inspection, the condition of which of the following is assessed under exterior construction criteria?
During a home inspection, the condition of which of the following is assessed under exterior construction criteria?
Which aspect is NOT relevant to the interior design criteria for a home?
Which aspect is NOT relevant to the interior design criteria for a home?
Which of the following statements about the main elements of buying a home is correct?
Which of the following statements about the main elements of buying a home is correct?
What is the maximum percentage of monthly income that your mortgage payment should ideally be?
What is the maximum percentage of monthly income that your mortgage payment should ideally be?
If you can afford a monthly payment of $1,000, what is the maximum house price you can buy with a 6% APR mortgage and a 20% down payment?
If you can afford a monthly payment of $1,000, what is the maximum house price you can buy with a 6% APR mortgage and a 20% down payment?
What do banks consider when applying affordability ratios for mortgage qualification?
What do banks consider when applying affordability ratios for mortgage qualification?
What is the rule of thumb for the housing expense ratio regarding a borrower's monthly income?
What is the rule of thumb for the housing expense ratio regarding a borrower's monthly income?
What is the range for the total expense ratio that lenders generally require?
What is the range for the total expense ratio that lenders generally require?
Which of the following is NOT typically included in calculating the housing expense ratio?
Which of the following is NOT typically included in calculating the housing expense ratio?
What does a 20% down payment signify in relation to a home purchase?
What does a 20% down payment signify in relation to a home purchase?
Calculating affordability for a home purchase primarily involves which of the following factors?
Calculating affordability for a home purchase primarily involves which of the following factors?
A larger down payment on a home leads to a higher interest rate on the mortgage.
A larger down payment on a home leads to a higher interest rate on the mortgage.
Obtaining renter's insurance is important for covering personal belongings and liability situations for tenants.
Obtaining renter's insurance is important for covering personal belongings and liability situations for tenants.
The home-buying process includes a step for conducting a pest inspection.
The home-buying process includes a step for conducting a pest inspection.
At the end of a lease, tenants are required to leave the rental property in a significantly worse condition than they found it.
At the end of a lease, tenants are required to leave the rental property in a significantly worse condition than they found it.
The first step in the home-buying process is to find and evaluate a property to purchase.
The first step in the home-buying process is to find and evaluate a property to purchase.
The condition of electrical fixtures is assessed under the exterior construction criteria during a home inspection.
The condition of electrical fixtures is assessed under the exterior construction criteria during a home inspection.
The amount of closet space is included in the interior design criteria for a home.
The amount of closet space is included in the interior design criteria for a home.
The condition of bricks or other siding is evaluated as part of the interior facilities criteria.
The condition of bricks or other siding is evaluated as part of the interior facilities criteria.
The neighborhood appearance is a factor considered in the exterior facilities criteria.
The neighborhood appearance is a factor considered in the exterior facilities criteria.
Size and arrangement of rooms are evaluated under the exterior construction criteria.
Size and arrangement of rooms are evaluated under the exterior construction criteria.
The quality of landscaping is included in the exterior facilities criteria.
The quality of landscaping is included in the exterior facilities criteria.
Adequate electrical outlets are considered under the interior construction criteria.
Adequate electrical outlets are considered under the interior construction criteria.
Condition of the roof is one of the factors assessed in the exterior construction criteria.
Condition of the roof is one of the factors assessed in the exterior construction criteria.
A larger down payment leads to higher mortgage payments.
A larger down payment leads to higher mortgage payments.
Settlement costs for a mortgage are typically between 2 to 6 percent of the loan amount.
Settlement costs for a mortgage are typically between 2 to 6 percent of the loan amount.
Mortgage lenders should only consider a borrower's income when qualifying for a mortgage.
Mortgage lenders should only consider a borrower's income when qualifying for a mortgage.
PITI includes principal, interest, taxes, and insurance payments.
PITI includes principal, interest, taxes, and insurance payments.
Owning a home does not require any additional funds for maintenance costs.
Owning a home does not require any additional funds for maintenance costs.
A mortgage is defined as a short-term loan specifically for property purchases.
A mortgage is defined as a short-term loan specifically for property purchases.
The maximum total monthly expense ratio allowed by banks is 38% of a borrower's gross income.
The maximum total monthly expense ratio allowed by banks is 38% of a borrower's gross income.
Paying off a mortgage early always results in losing tax deductions.
Paying off a mortgage early always results in losing tax deductions.
A borrower with a $192,000 mortgage at an APR of 4.5% will have monthly payments of $1,072.84.
A borrower with a $192,000 mortgage at an APR of 4.5% will have monthly payments of $1,072.84.
In the first month of a 30-year mortgage, more than half of the payment typically goes toward interest.
In the first month of a 30-year mortgage, more than half of the payment typically goes toward interest.
Over the life of a 30-year mortgage, the total cost of repaying a $192,000 loan is approximately $350,000.
Over the life of a 30-year mortgage, the total cost of repaying a $192,000 loan is approximately $350,000.
Interest payments on a 30-year mortgage cost about $80,000 over the life of the loan.
Interest payments on a 30-year mortgage cost about $80,000 over the life of the loan.
Loan amortization indicates that the principal payment increases steadily over time.
Loan amortization indicates that the principal payment increases steadily over time.
Taking a loan for a longer term generally results in lower monthly payments compared to shorter loans.
Taking a loan for a longer term generally results in lower monthly payments compared to shorter loans.
Homeownership benefits may outweigh the high interest expenses incurred over time.
Homeownership benefits may outweigh the high interest expenses incurred over time.
The principal balance of a mortgage decreases significantly in the first few months of payment.
The principal balance of a mortgage decreases significantly in the first few months of payment.
If you can afford a $1,000 monthly payment, you cannot buy a house priced at $208,490 with a 6% APR mortgage and a 20% down payment.
If you can afford a $1,000 monthly payment, you cannot buy a house priced at $208,490 with a 6% APR mortgage and a 20% down payment.
Banks typically require that the housing expense ratio should not exceed 25-30% of a borrower's monthly income.
Banks typically require that the housing expense ratio should not exceed 25-30% of a borrower's monthly income.
A higher monthly payment correlates directly with a lower house price.
A higher monthly payment correlates directly with a lower house price.
A 20% down payment generally signifies a higher interest rate on a mortgage.
A 20% down payment generally signifies a higher interest rate on a mortgage.
The total expense ratio that lenders generally require should not exceed 33-38% of a borrower's monthly income.
The total expense ratio that lenders generally require should not exceed 33-38% of a borrower's monthly income.
Owning a home incurs only the cost of the mortgage payment.
Owning a home incurs only the cost of the mortgage payment.
The maximum house price you can afford depends on your monthly payment capability and interest rate.
The maximum house price you can afford depends on your monthly payment capability and interest rate.
The affordability ratio helps banks determine the size of the mortgage a borrower qualifies for.
The affordability ratio helps banks determine the size of the mortgage a borrower qualifies for.
Johnny's total monthly debt payments, including his loans, amount to $425.
Johnny's total monthly debt payments, including his loans, amount to $425.
The monthly payment for Johnny's mortgage would be $1,031.23.
The monthly payment for Johnny's mortgage would be $1,031.23.
Johnny will need to make a down payment of $43,000 to buy the house.
Johnny will need to make a down payment of $43,000 to buy the house.
The combined total of Johnny's mortgage payment and other debt payments exceeds 35% of his monthly income.
The combined total of Johnny's mortgage payment and other debt payments exceeds 35% of his monthly income.
Johnny's maximum housing expense ratio allowed by the bank is 28% of his monthly income.
Johnny's maximum housing expense ratio allowed by the bank is 28% of his monthly income.
The total monthly payment for property tax and homeowner's insurance is $268.75.
The total monthly payment for property tax and homeowner's insurance is $268.75.
Johnny's total housing expense, including his mortgage payment and additional costs, is $1,514.23.
Johnny's total housing expense, including his mortgage payment and additional costs, is $1,514.23.
A mortgage with a 6% APR on a 30-year term results in a total payment less than 20% of Johnny's monthly income.
A mortgage with a 6% APR on a 30-year term results in a total payment less than 20% of Johnny's monthly income.
Flashcards
Rental Property Maintenance
Rental Property Maintenance
Keeping rental facilities in good condition, reporting needed repairs, and respecting noise levels.
Lease End Procedures
Lease End Procedures
Cleaning the apartment, returning it to move-in condition, providing address for deposit return and obtaining documented deposit deductions.
Home Ownership Needs Assessment
Home Ownership Needs Assessment
Evaluating the desire for home ownership, considering housing types, and calculating affordable amounts, including pre-approval.
Secure Home Financing
Secure Home Financing
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Finalizing Home Purchase
Finalizing Home Purchase
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Owning a new house advantages
Owning a new house advantages
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Owning a new house disadvantages
Owning a new house disadvantages
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Owning a previously owned house advantages
Owning a previously owned house advantages
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Owning a previously owned house disadvantages
Owning a previously owned house disadvantages
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Condominium (apartment) advantages
Condominium (apartment) advantages
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Condominium (apartment) disadvantages
Condominium (apartment) disadvantages
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Rental search steps
Rental search steps
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Lease review before signing
Lease review before signing
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Renting vs. Buying Housing
Renting vs. Buying Housing
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Renting Advantages
Renting Advantages
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Renting Disadvantages
Renting Disadvantages
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Buying Advantages
Buying Advantages
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Buying Disadvantages
Buying Disadvantages
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Housing Costs & Lifecycle
Housing Costs & Lifecycle
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Mortgage
Mortgage
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Housing Alternatives
Housing Alternatives
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Home Inspection Interior Critera
Home Inspection Interior Critera
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Home Inspection Interior Design
Home Inspection Interior Design
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Home Inspection Exterior Construction Criteria
Home Inspection Exterior Construction Criteria
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Home Inspection Exterior Facilities
Home Inspection Exterior Facilities
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Housing Location Considerations
Housing Location Considerations
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Home Buying - Down Payment
Home Buying - Down Payment
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Home Buying - Housing Demand
Home Buying - Housing Demand
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Home Inspection - Electrical
Home Inspection - Electrical
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Affordable Home Price
Affordable Home Price
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Monthly Payment Rule of Thumb
Monthly Payment Rule of Thumb
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Housing Expense Ratio
Housing Expense Ratio
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Total Expense Ratio
Total Expense Ratio
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Affordability Ratios
Affordability Ratios
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What are affordability ratios used for?
What are affordability ratios used for?
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What does the housing expense ratio include?
What does the housing expense ratio include?
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What does the total expense ratio include?
What does the total expense ratio include?
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What is the down payment amount for Johnny's desired house?
What is the down payment amount for Johnny's desired house?
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How much will Johnny need to borrow for his mortgage?
How much will Johnny need to borrow for his mortgage?
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What is Johnny's monthly mortgage payment?
What is Johnny's monthly mortgage payment?
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What is Johnny's total monthly debt payment?
What is Johnny's total monthly debt payment?
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How much are Johnny's estimated monthly property tax and insurance payments?
How much are Johnny's estimated monthly property tax and insurance payments?
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What's Johnny's housing expense ratio?
What's Johnny's housing expense ratio?
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What's Johnny's total expense ratio?
What's Johnny's total expense ratio?
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Will the bank lend Johnny the money?
Will the bank lend Johnny the money?
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Home Ownership Needs
Home Ownership Needs
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Home Price Negotiation
Home Price Negotiation
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Mortgage Options
Mortgage Options
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Interior Construction Criteria
Interior Construction Criteria
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Interior Design Criteria
Interior Design Criteria
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Exterior Construction Criteria
Exterior Construction Criteria
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Exterior Facilities Criteria
Exterior Facilities Criteria
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Location in Home Buying
Location in Home Buying
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What is a Down Payment?
What is a Down Payment?
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What is Housing Demand?
What is Housing Demand?
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Why is Home Inspection Important?
Why is Home Inspection Important?
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Future Mortgage Balance
Future Mortgage Balance
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Mortgage Amortization
Mortgage Amortization
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Interest Cost of a Mortgage
Interest Cost of a Mortgage
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Mortgage Interest Expense
Mortgage Interest Expense
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Homeownership Benefits
Homeownership Benefits
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Homeownership Drawbacks
Homeownership Drawbacks
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Mortgage Calculator
Mortgage Calculator
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Loan Amortization
Loan Amortization
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What do affordability ratios tell us?
What do affordability ratios tell us?
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What are included in the housing expense ratio?
What are included in the housing expense ratio?
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What are included in the total expense ratio?
What are included in the total expense ratio?
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Down Payment Impact
Down Payment Impact
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Mortgage Application Requirements
Mortgage Application Requirements
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What are 'Points' in a Mortgage?
What are 'Points' in a Mortgage?
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Closing Costs Explained
Closing Costs Explained
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PITI: Housing Budget
PITI: Housing Budget
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Mortgage Qualifying Factors
Mortgage Qualifying Factors
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Mortgage Affordability Guidelines
Mortgage Affordability Guidelines
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What does 'APR' stand for?
What does 'APR' stand for?
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What is a Housing Expense Ratio?
What is a Housing Expense Ratio?
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What is a Total Expense Ratio?
What is a Total Expense Ratio?
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Why is knowing the interest rate important?
Why is knowing the interest rate important?
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What factors determine affordability ratios?
What factors determine affordability ratios?
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What is a 'mortgage'?
What is a 'mortgage'?
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Study Notes
Personal Finance Lecture Notes
- Course name: AFN 221, Personal Finance
- Lecture topic: Mortgage
- Instructor: Andreas Milidonis
- University: University of Cyprus
Course Concept Map
- Introduction: Covers foundational concepts for the course.
- Savings: Discussion of various savings strategies and investment options.
- Interest Rates: Details on how interest rates influence financial decisions.
- Inflation & Time Value of Money: Examining the impact of inflation on financial planning.
- Money Management: Strategies for effective money management.
- Consumer Borrowing: Analysis of borrowing options and their consequences.
- Review & Midterm Exam (Credit): Materials for the exam.
- Mortgage: Specific details regarding mortgages.
- Insurance & Risk Management: Examining insurance and managing risk.
- Retirement: Strategies for planning for retirement.
- Investing: Strategies for investing money.
- Risk & Return: Analysis the trade-off between risk and return.
- Review & Final Exam: Review materials for the final exam.
- Biases: Cognitive and emotional biases affecting financial decision-making.
Housing Costs and Benefits by Lifecycle Stage
- Young Single: Renting offers flexibility and limited maintenance; purchasing a home has financial and tax benefits.
- Single Parent: Renting can be suitable for children and flexibility; purchasing can meet family needs.
- Young Couple, No Children: Renting offers convenience and flexibility; purchasing builds financial security.
- Couple, Children No Longer at Home: Renting offers convenience and flexibility; purchasing a home with less maintenance is suitable.
- Couple, Young Children: Renting provides facilities in a family-oriented area; purchasing meets family needs.
- Retired Person: Renting can meet financial, social, and physical needs; purchasing a low-maintenance home is suitable.
Housing Alternatives: Renting vs. Buying
- Renting Advantages: Flexibility, less maintenance responsibility, lower initial expenses.
- Renting Disadvantages: No tax benefits, limited remodeling opportunities, possible restrictions on pets and activities.
- Buying Advantages: Financial benefits (investment potential), pride of ownership, tax benefits, more living freedom.
- Buying Disadvantages: Less financial flexibility, higher living expenses, financial risk due to market conditions, limited mobility.
Rent or Buy Housing (Different Scenarios)
- Renting an Apartment: Advantages - easy to move, few responsibilities, minimal financial commitment; Disadvantages - no tax benefits, limitations on remodeling.
- Renting a House: Advantages - easy to move, less maintenance, more space; Disadvantages - higher utility expenses, limitations on remodeling.
- Owning a New House: Advantages - no previous owner, pride of ownership, tax benefits; Disadvantages - financial commitment, higher living expenses, limited mobility.
- Owning a Previously Owned House: Advantages - pride of ownership, established neighborhood, tax benefits; Disadvantages - financial commitment, potential repairs, limited mobility.
- Owning a Condominium: Advantages - tax benefits, fewer maintenance responsibilities, good accessibility; Disadvantages - less privacy, financial commitment, uncertainty in property value.
Housing Rental Activities
- The Search: Select an area, compare comparable units, speak to current and past residents.
- Before Signing a Lease: Verify the lease’s terms and conditions, seek legal advice, document the condition of the unit, and understand possible liabilities.
- Living in Rental Property: Maintain the property's condition, address needed repairs promptly, respect neighbors' rights, and be insured.
- At the End of the Lease: Clean and return the property to its initial condition, collect security deposit documents, and resolve any disputes.
The Home Buying Process
- Step 1: Determine home-ownership needs, types of housing, affordability.
- Step 2: Find and evaluate properties, select a location, work with a real-estate agent, conduct inspections.
- Step 3: Price the property, determine appropriate market price, negotiate price agreement.
- Step 4: Obtain financing, determine down payment, investigate mortgage options and rates, apply for mortgage.
- Step 5: Close the purchase transaction, arrange a closing date, collect necessary documents, final walk-through.
Conducting a Home Inspection
- Exterior Facilities: Neighborhood appearance, streets/sidewalks, landscaping, driveway/garage, outdoor lighting/patio, drainage.
- Exterior Construction: Building materials, foundation, windows, roof/gutters, chimney.
- Interior Construction: Electrical/wiring, plumbing fixtures, water pressure/heater, heating unit, walls/floors/doors.
- Interior Design: Room sizes/arrangement, closets/storage, door sizes, kitchen layout/appliances, ventilation, laundry area, bedrooms/accessibility, electrical outlets.
Calculating Mortgage Payment & Future Balance
- Calculate a mortgage payment by considering down payment, the amount borrowed, interest rate, loan term.
- Use online calculators or financial applications for automated calculations.
Mortgage Amortization
- A significant portion of the initial mortgage payments is for interest, not principal reduction. As time progresses, the interest portion decreases, and the principal portion increases.
- Interest costs of a mortgage over the life of the loan can be substantial.
Affordability Ratios
- Calculate the monthly mortgage payment you can afford:
- Banks use affordability ratios to assess how much a borrower can afford to repay their monthly mortgage payment, taxes, insurance, and other debts.
- Housing expense ratio (25-30% of monthly income).
- Total expense ratio (33-38% of monthly income).
Should You Pay Off Your Mortgage Early?
- Consider prepayment penalties and loss of tax deductions. Prioritize high-interest debts before paying more on the mortgage.
Key Mortgage Terms
- APR: Annual Percentage Rate.
- Down Payment: Portion of the purchase price paid upfront.
- Collateral: The property being used as security for the loan (in case of default).
- Fixed-Rate Mortgage: Mortgage with a consistent interest rate throughout the loan term.
- Adjustable-Rate Mortgage (ARM): Mortgage with an interest rate that adjusts based on market conditions.
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Description
Test your knowledge on mortgage concepts as part of the AFN 221 Personal Finance course. This quiz covers key topics related to mortgages, their impact on personal finance, and relevant strategies for effective money management. Assess your understanding and prepare for deeper financial discussions.
