Personal Finance chapter 7

home equity loans: benefits

allows a homeowner to borrow on the paid- up value of the property. it allows you to deduct the interest on consumer purchases of your federal income tax return, but this revolving credit plan can keep you continually in debt as you request new cash advances

home ownership: benefits, purchasing factors, documents

The main advantages of owning a home is the financial benefit of the deductibility of mortgage interest and real estate tax payments, reducing federal income taxes. The main motives of many home buyers is stability of residence and personalized living. A disadvantage is financial uncertainty. Obtaining money for a down payment and securing mortgage financing may make problems. One must then be responsible for the maintenance and costs of repainting, repairs, and home improvements.

renting: advantages and disadvantages

The main benefits of renting a place of residence is having fewer responsibilities than homeowners since they do not have to deal with maintenance and repairs. It also offers mobility when a location change is necessary or desirable. Taking possession of a rental house is cheaper than buying a home. The main disadvantages of renting is that renters are limited in the types of activities they can pursue in their place of residence, such as monitored noise or restrictions of pets and certain decorations. Tenants cannot take tax deductions for mortgage interest and property taxes or benefit from the increased real estate value.

lease agreements: parts, subletting

parts of the agreement: description of the property, address of the lessor, name of tenant (the lessee), the effective date of the lease and the length of the lease, the amount of the security deposit, a list of utilities, restrictions on activities, charges for damages, conditions on when landlord can enter subletting: allows you to have another person take over rent payments and live in the rental unit.

mortgages: affordability factors, amortization, escrow, PMI, points, rate lock

factors: 1. complete the application and meet with lender to present evidence of employment, income... 2. lender otains credit report and verifies application and financial status 3. mortgage is either approved or denied, decision based on financial history and evaluation of the home you want to buy amortization: the reduction of a loan balance through payments made over a period of time escrow: money, usually deposited with the lending institution, for the payment of property taxes and home insurance PMI: private mortgage insurance is usually required if the downpayment is less than 20%. protect lender from financial lost due to default. points: prepaid intérest charged by the lender. deed: is the document that transfers ownership of property from one party to another rate cap: restricts the amount by which the interest rate can increase or decrease during the ARM term