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# 6-2 Total Housing Cost

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### 6-2 Total Housing Cost

1. 1. TOTALHOUSINGCOSTUNIT 6, LESSON 2ORCUTT ACADEMY HIGH SCHOOLFINANCE & ACCOUNTING
2. 2. Calculating Mortgage PaymentTaxes: The Cost and the BenefitInsurance & MaintenanceCalculating Total Housing CostPREVIEW
3. 3. TOTAL HOUSINGCOST1. Mortgage Payment2. Taxes• The Cost and the Benefit3. Insurance4. Maintenance
4. 4. CALCULATING MORTGAGE PAYMENT
5. 5. CALCULATE MORTGAGEUSING MULTIPLIERInterest Rate 15-year mortgageMultipliers30-year mortgage4% 7.4 4.774.5% 7.65 5.075% 7.91 5.375.5% 8.17 5.686% 8.44 6.006.5% 8.71 6.327% 8.99 6.658% 9.56 7.349% 10.14 8.0510% 10.75 8.78Multiply the multiplier by your mortgage expressedin thousands of dollars (divided by 1000)
6. 6. EXAMPLESkye is taking out a \$100,000 30-year mortgage at 6.5%. Whatwill be her monthly mortgage payment?The multiplier is 6.32, soMonthly mortgage payment = 6.32 x 100,000/1,000= 6.32 x 100= \$632
7. 7. CALCULATE MORTGAGEUSING FORMULAM = P [ i(1 + i)n ] / [ (1 + i)n - 1]M = The monthly paymentP = The principal, or the amount of money being borrowedi = The interest for each compounding period, or the interestper month for a standard mortgagen = The number of compounding periods, or the number ofmonths for a standard mortgage
8. 8. EXAMPLEGo to Mortgage Math Workbook
9. 9. TAXES: THE COST AND THE BENEFIT
10. 10. TAXES: THE COST• Homeowners pay property tax, which helps support localgovernments.• Based on the assessed value of your home• Land + Improvements• May be higher or lower than the purchase price of thehome
11. 11. TAX RATES• Set by the county• Usually about 1-2%• Average property tax rates by state• Ex: Santa Barbara County
12. 12. CALCULATINGTAX COSTSThe value of a home in Greenwood County is \$285,000.Property taxes in Greenwood are 1.25%. What is the monthlyproperty tax bill for the home?Annual property tax bill: (285,000)(.0125) = \$3562.50Monthly property tax bill: (3562.50)/12 = \$296.88
13. 13. TAXES: THE BENEFIT• You can deduct• Interest paid to buy, build, or improve your home• Interest paid on a home equity loan• Property taxes• You can deduct a second home• Learn more about Tax Deductions on Mortgage Interest
14. 14. CALCULATING THE TAXBENEFIT OF OWNINGTAX BENEFIT =(Mortgage Payment + Property Taxes) (Tax Bracket)EXAMPLETyler’s gross annual income is \$83,000. His mortgagepayment is \$1,200/month and he pays \$260/month in propertytaxes. What is his tax benefit from owning.(1200+260)(.25) = \$365Tax Brackets 2012 (Estimated) Single (Est) Married Filing Jointly (Est) Head of Household10% Bracket \$0 – \$8,700 \$0 – \$17,400 \$0 – \$12,40015% Bracket \$8,700 – \$35,350 \$17,400 – \$70,700 \$12,400 – \$47,35025% Bracket \$35,350 – \$85,650 \$70,700 – \$142,700 \$47,350 – \$122,30028% Bracket \$85,650 – \$178,650 \$142,700 – \$217,450 \$122,300 – \$198,05033% Bracket \$178,650 – \$388,350 \$217,450 – \$388,350 \$198,050 – \$388,35035% Bracket \$388,350+ \$388,350+ \$388,350+
15. 15. HOMEOWNER’S INSURANCE
16. 16. HOMEOWNER’SINSURANCE• On average, between \$45 and \$75/month• Varies depending on• Home’s value• Location• Homeowner’s demographics• Type and amount of insurance