Transcript Chapter 16 The Finances of Housing

Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
What are some factors that should be
included in the decision of whether
renting or buying a home is the best
action for you?
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
It is important to understand all of your options and to consider
the advantages, disadvantages, and costs of each when making
housing decisions. You should understand the processes
involved with homeownership before buying or selling.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
mobility
tenant
landlord
lease
security deposit
renters insurance
equity
escrow account
private mortgage
insurance (PMI)
mortgage
Glencoe Business and Personal Finance
points
amortization
fixed-rate mortgage
adjustable-rate
mortgage (ARM)
home equity loan
refinance
closing
title insurance
deed
appraisal
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 1 Housing Options
Evaluate various housing alternatives.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 1 Housing Options
Your Lifestyle and Choice of Housing
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 1 Housing Options
Your Lifestyle and Choice of Housing
Renting an
apartment gives
you more
mobility
Glencoe Business and Personal Finance
But
You give up
the tax
advantages of
homeownership
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 1 Housing Options
Renting Versus Buying
Libraries
Government
Agencies
Sources of
Housing
Information
Real Estate
Agents
Glencoe Business and Personal Finance
Newspapers
Internet
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 1 Housing Options
What are the benefits and disadvantages of owning a house
and a condominium? Who might benefit more from owning a
condominium rather than a house?
While both offer pride of ownership and tax benefits, a house
usually has more space and privacy than a condominium.
A condominium though would have fewer maintenance costs
and responsibilities and be closer to recreation and businesses.
A person or couple with no children would probably prefer to
own a condominium.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 2 Renting a Residence
Assess the advantages and disadvantages of renting.
Identify the costs of renting.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 2 Renting a Residence
Selecting a Rental Unit
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 2 Renting a Residence
Advantages of Renting
Mobility
Advantages
of Renting
Low Initial
Costs
Glencoe Business and Personal Finance
Fewer
Responsibilities
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Disadvantages of Renting
Financial and Lifestyle Restrictions
Legal Issues
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 2 Renting a Residence
Suppose you and a friend decide to rent an apartment together.
Explain why it might be important to have both of your names
listed on the lease agreement.
Answers may include that by having your friend’s name on the
lease as well as your own, he will be legally responsible for
ensuring that the rent is paid and the apartment is kept in good
condition.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Identify the advantages and disadvantages of owning a
residence.
Explain how to evaluate a property.
Discuss the financing involved in purchasing a home.
Describe a plan for selling a home.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
The Finances of Housing
Chapter
16
Section 3 Buying and Selling a Home
The Home-Buying Process
1
Determine
Your Home
Ownership
Needs
Glencoe Business and Personal Finance
2
Find and
Evaluate a
Property to
Purchase
3
Price the
Property
4
Obtain
Financing
5
Close the
Transaction
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 1: Determine Your Home
Ownership Needs
Single-Family
Dwellings
Multiunit
Dwellings
Types of
Housing
Condominiums
Cooperative
Housing
Prefabricated
Homes
Mobile
Homes
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 1: Determine Your Home
Ownership Needs
Price
Affordability
and Your
Needs:
Considerations
Down Payment
Size
Quality
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 2: Find and Evaluate a Property
to Purchase
Select a
Location
Zoning laws
Hire a Real
Estate Agent
Free to the buyer
Home
Inspection
Exterior
Interior
Professional
inspection
Inspection report
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 3: Price the Property
Determining the Price
How long has the home been on the market?
What have similar homes sold for?
Is it a “seller’s market” or a “buyer’s market?”
Are the owners in a hurry to sell?
Does the home fit your needs?
How easily can you arrange financing?
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 4: Obtain Financing
Determining Amount of Down Payment
– PMI (Private Mortgage Insurance)
Qualifying for a Mortgage (Prequalified)
Paying Points
Types of Mortgages
–
–
–
–
–
Fixed-Rate
Adjustable-Rate
Government Financing
Home Equity Loans
Refinancing
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Step 5: Close the Transaction
Closing Cost
Escrow Account
– Taxes
– Insurance
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Selling a Home
Preparing the Home for Selling
Determining a Selling Price
– Appraisal
Choosing a Real Estate Agent
Sale by Owner
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
16
The Finances of Housing
Section 3 Buying and Selling a Home
Suppose you were applying for a home loan for $150,000.
Decide whether you would rather have a 6.5 percent fixed-rate
mortgage or an adjustable-rate mortgage at 5.5 percent.
Explain your reasoning.
Students may choose the 6.5 percent fixed-rate mortgage,
recognizing that even though it is higher than the ARM, it will
never change while the ARM could go up to 10 percent or more.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
Money and Inflation
Three Main Functions of Money
Medium of
Exchange
Unit of
Value
Store of
Exchange
When there is inflation, the Fed may increase interest rates
to curb inflation so that money does not lose its value.
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Finances of Housing
16
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
End of
Glencoe Business and Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.