Personal Finance ch 7

home equity loan

a escond mortgage. a loan based on the difference between the current market value of a home and the amount the borrower owes on the mortgage. a source of extra cash, but can keep homeowner in debt

mortgage

a long-term loan extended to someone who buys property. buyer makes monthly payments over 15, 20, or 30 years. the home is collateral/ guarantee that loan will be repaid. if fail to pay, foreclosure.

down payment

a portion of the total cost of an item that is required at the time of purchase. make monthly payments, pay property taxes, buy homeowners insurance.

duplex

a single building divided into living spaces for two families or two units

private mortgage insurance (PMI)

a special policy that protects the lender in case the buyer cannot make payments or cannot make them on time. sometimes cost is paid up front, sometimes spread the cost over the life of the loan. insurance can be dropped when borrower has paid between 20-25 percent. often lenders require it if less than 20% of down payment is paid.

renters insurance

a type of insurance that covers the loss of a tenant's personal property as a result of damage or theft.

title insurance

a type of insurance that protects the buyer if problems with the title are found later

escrow account

an account where money is held in trust until it can be delivered to a designated party.

security deposit

an amount of money paid to the owner of the property by a tenant to guard against any financial loss or damage that the tenant might cause. usually equal one or two months' rent and are paid when you sign a lease. landlord returns it when you move out minus any charges for damage you may have caused or for unpaid rent.

appraisal

an estimate of the current value of the property, used as a basis for a listing price

cooperative housing

apartmentstyle living arrangement in which a building that contains a number of units is owned by a nonprofit organization. members of organization do not own the property. they pay a monthly fee that covers their rent and the operating expenses of the organization

triplex

building divided into three units

earnest money

buyer pays the seler a portion of the purchase price when the two agree on a price and sign a purchase agreement that states their intention to complete the sale. often are conditional. later applied toward the down payment.

fixed-rate mortgage

conventional mortgage. has a fixed interest rate and a fixed schedule of payments.

multiunit dwellings

duplexes and townhouses.

points

extra charges that must be paid by the buyer to the lender in order to get a lower interest rate. each one equals 1 percent of the loan amount. may have to pay if you want a lower interest rate.

garden apartment

features a patio and a bit of lawn

closing

final step in th ehome-buying process. a meeting of the seller, the buyer, and the lender of funds to complete the transaction. documents are signed, details settled, money is paid. pay closing costs

mobile homes

fully assmebled in factories. contain fully equipped kitchens, bathrooms, and fireplaces. some home owners purchase the land on which their houses are located or space can be rented in mobile-home parks with access to community rec. inexpensive, not well constructed, do not increase in value.

lease

legal document that defines the conditions of the rental agreement between the tenant and the landlord. protects the rights of both. tenant is protected from rent increases during the rent term. gives landlord the right to take legal action against a tenant who does not pay his rent or who damages property. otherwise the tenant cannot be locked/forced out without a court hearing. includes description of property, names, dates, amount of security deposit, amount and due date of monthly rent and penalties for late payment, list of restrictions, tenant's right to sublet the rental unit, conditions under which the landlord may enter apartment, charges for damage or moving out early or refusing to pay rent

rate cap

limits the amount the interest rate can rise or fall on ARM

prefabricated homes

manufactured and partially assembled at a factory. pieces are transported to a building site and put together there. cheaper because the pass production and partial assmebly at the factory

refinance

obtain a new mortgage to replace an existing one

condominium

one of a group of apartments or townhouses that people own instead of rent. owners pay a monthly fee to cover the cost of maintenance, repairs, improvements, and insurance for the building and its common spaces. the unit owners form an association, which manages the housing complex. common spaces, such as hallways, lawns, elevators, and rec areas, belong to the association.

townhouse

one of many single-family units attached to other units. each unit has its own outside entrance.

convertible ARM

permit a borrower to convert, or change, an ARM to a fixed-rate mortgage during a certain period of time

real estate agent

person who arranges the sale and purchase of homes as well as other buildings and land. good sources of information about the location, availability, prices, and quilty of homes. can negotiate the purchase price between buyer and seller. help buyers arrange financing for the purchase, can recommend lawyers, insurance agents, and home inspectors. receive a comission of 3 to 6 percent.

landlord

person who owns the property that is rented

tenant

rent the place you live

deed

the official document transferring ownership from seller to buyer.

amortization

the reduction of a loan balance through payments made over a period of time. paid every month, balance is reduced each time you make payment. first applied to the interest and then the principal.

equity

the value of the home less the amount still owed on the money borrowed to purchase it

single-family dwellings

usually stands on a separate lot with some outdoor living space, not attached to any other buildings, provides the most privacy, the most expensive type of housing

adjustable-rate mortgage (ARM)

variable-payment mortgage. interest rate increases or decreases during the life of the loan according to economic indicators