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
  17. 17. LEARN MORE…Tips on homeowner’s insurance
  18. 18. MAINTENANCE
  19. 19. MAINTENANCEAbout 1% of the home’s value on averageExample:A home with a value of $475,000Annual maintenance = (475,000)(.01) = $4,750Monthly maintenance = 4,750/12 = $395.83
  20. 20. MAINTENANCECHECKLISTNational Healthy Homes Training Center Checklist
  21. 21. TOTAL HOUSING COST
  22. 22. TOTALHOUSING COSTPUTTING THE PIECES TOGETHER!Total Housing Cost =(Mortgage Payment + Property Tax + Insurance + Maintenance) – (Tax Benefit)
  23. 23. EXAMPLE 1Taylor is an actor living in Los Angeles, California where the propertytax is 1.25%. Her gross annual income is $71,500 and the value of herproperty is $367,000. Her monthly mortgage payment is $1,200 and shepays $40/month for insurance. Estimate her total housing costs.Total Housing Cost =(Mortgage Payment + Property Taxes + Insurance + Maintenance) – (Tax Benefit)Mortgage Payment = $1,200Property Taxes = (367,000)(.0125)/12 = $382.29Insurance = $40Maintenance = (367,000)(.01)/12 = $305.83Tax Benefit = (Mortgage Payment + Property Taxes)(Tax Bracket)(1200 + 382.29)(.25) = 395. 57Total Cost = 1200 + 382.29 + 40 + 305.83 - 395.57 = $1532.55
  24. 24. 1. To calculate the mortgage payment, what three pieces ofinformation do you need to know?2. How do taxes affect the overall total cost?3. What components make up the total monthly housingcost?ESSENTIAL QUESTIONSWHAT ARE YOU LEARNING? WHY ARE YOU LEARNING IT? HOW WILL YOU USE IT?

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