Personal Finance and Investments-Housing

Personal Finance and Investments-Housing - Costs including...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Personal Finance and Investments FIN 2100 Chapter 9: The Housing Decision: Factors and Finances Evaluating Housing Alternatives o Your lifestyle guidelines suggest housing Traditional guidelines suggest housing payments (PITI) are no more than 33% of gross income, with all debt payments not exceeding 38% of gross income No more than 2 ½ times your annual income Target 10-20% down payment o Opportunity cost of housing choices: Lost earnings on down payment Time and cost of commuting Renters lose tax savings and equity growth Time and money to repair and improve Time and effort when you have a home built to your personal specifications (be careful for risks involved with building a house) o Advantages of renting Mobility Fewer maintenance responsibilities Lower initial costs o Disadvantages of renting Few financial benefits Restricted lifestyle Legal concerns of a lease
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Costs including a security deposit, utilities, and renter’s insurance o Advantages of Owing Pride of ownership • American dream/ norm Reduced income taxes • Deduct mortgage interest/ taxes • Incremental benefit must be > standard deduction Build an equity by paying down the loan or by price appreciation Builds your credit rating Hedge against inflation • Disadvantages of Owning o Financial uncertainty Get down payment and financing Home values could drop Inability to refinance o Limited mobility Can take time to sell o Higher living costs Maintenance, repairs Homeowners insurance Real estate taxes Money Principal: Houses • Money Principal 6: Buying a house is essential to wealth accumulation (and just because a bank will give you a mortgage does NOT mean you can afford to repay it!)...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern