This document discusses how to calculate total housing costs. It includes calculating the mortgage payment using multipliers or formulas based on the loan amount, interest rate and term. Property taxes are calculated as a percentage of the home value and affect total costs. Homeowner's insurance and maintenance are estimated at around 1% of the home value annually. Total housing costs equal the mortgage payment, taxes, insurance and maintenance minus any tax deductions. An example calculates all costs for a homeowner to determine their total monthly costs.

1. TOTAL
HOUSING
COST
UNIT 6, LESSON 2
ORCUTT ACADEMY HIGH SCHOOL
FINANCE & ACCOUNTING

2. Calculating Mortgage Payment
Taxes: The Cost and the Benefit
Insurance & Maintenance
Calculating Total Housing Cost
PREVIEW

3. TOTAL HOUSING
COST
1. Mortgage Payment
2. Taxes
• The Cost and the Benefit
3. Insurance
4. Maintenance

4. CALCULATING MORTGAGE PAYMENT

5. CALCULATE MORTGAGE
USING MULTIPLIER
Interest Rate 15-year mortgage
Multipliers
30-year mortgage
4% 7.4 4.77
4.5% 7.65 5.07
5% 7.91 5.37
5.5% 8.17 5.68
6% 8.44 6.00
6.5% 8.71 6.32
7% 8.99 6.65
8% 9.56 7.34
9% 10.14 8.05
10% 10.75 8.78
Multiply the multiplier by your mortgage expressed
in thousands of dollars (divided by 1000)

6. EXAMPLE
Skye is taking out a $100,000 30-year mortgage at 6.5%. What
will be her monthly mortgage payment?
The multiplier is 6.32, so
Monthly mortgage payment = 6.32 x 100,000/1,000
= 6.32 x 100
= $632

7. CALCULATE MORTGAGE
USING FORMULA
M = P [ i(1 + i)n ] / [ (1 + i)n - 1]
M = The monthly payment
P = The principal, or the amount of money being borrowed
i = The interest for each compounding period, or the interest
per month for a standard mortgage
n = The number of compounding periods, or the number of
months for a standard mortgage

8. EXAMPLE
Go to Mortgage Math Workbook

9. TAXES: THE COST AND THE BENEFIT

10. TAXES: THE COST
• Homeowners pay property tax, which helps support local
governments.
• Based on the assessed value of your home
• Land + Improvements
• May be higher or lower than the purchase price of the
home

11. TAX RATES
• Set by the county
• Usually about 1-2%
• Average property tax rates by state
• Ex: Santa Barbara County

12. CALCULATING
TAX COSTS
The value of a home in Greenwood County is $285,000.
Property taxes in Greenwood are 1.25%. What is the monthly
property tax bill for the home?
Annual property tax bill: (285,000)(.0125) = $3562.50
Monthly property tax bill: (3562.50)/12 = $296.88

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. CALCULATING THE TAX
BENEFIT OF OWNING
TAX BENEFIT =
(Mortgage Payment + Property Taxes) (Tax Bracket)
EXAMPLE
Tyler’s gross annual income is $83,000. His mortgage
payment is $1,200/month and he pays $260/month in property
taxes. What is his tax benefit from owning.
(1200+260)(.25) = $365
Tax Brackets 2012 (Estimated) Single (Est) Married Filing Jointly (Est) Head of Household
10% Bracket $0 – $8,700 $0 – $17,400 $0 – $12,400
15% Bracket $8,700 – $35,350 $17,400 – $70,700 $12,400 – $47,350
25% Bracket $35,350 – $85,650 $70,700 – $142,700 $47,350 – $122,300
28% Bracket $85,650 – $178,650 $142,700 – $217,450 $122,300 – $198,050
33% Bracket $178,650 – $388,350 $217,450 – $388,350 $198,050 – $388,350
35% Bracket $388,350+ $388,350+ $388,350+

15. HOMEOWNER’S INSURANCE

16. HOMEOWNER’S
INSURANCE
• On average, between $45 and $75/month
• Varies depending on
• Home’s value
• Location
• Homeowner’s demographics
• Type and amount of insurance

17. LEARN MORE…
Tips on homeowner’s insurance

18. MAINTENANCE

19. MAINTENANCE
About 1% of the home’s value on average
Example:
A home with a value of $475,000
Annual maintenance = (475,000)(.01) = $4,750
Monthly maintenance = 4,750/12 = $395.83

20. MAINTENANCE
CHECKLIST
National Healthy Homes Training Center Checklist

21. TOTAL HOUSING COST

22. TOTAL
HOUSING COST
PUTTING THE PIECES TOGETHER!
Total Housing Cost =
(Mortgage Payment + Property Tax + Insurance + Maintenance) – (Tax Benefit)

23. EXAMPLE 1
Taylor is an actor living in Los Angeles, California where the property
tax is 1.25%. Her gross annual income is $71,500 and the value of her
property is $367,000. Her monthly mortgage payment is $1,200 and she
pays $40/month for insurance. Estimate her total housing costs.
Total Housing Cost =
(Mortgage Payment + Property Taxes + Insurance + Maintenance) – (Tax Benefit)
Mortgage Payment = $1,200
Property Taxes = (367,000)(.0125)/12 = $382.29
Insurance = $40
Maintenance = (367,000)(.01)/12 = $305.83
Tax Benefit = (Mortgage Payment + Property Taxes)(Tax Bracket)
(1200 + 382.29)(.25) = 395. 57
Total Cost = 1200 + 382.29 + 40 + 305.83 - 395.57 = $1532.55

24. 1. To calculate the mortgage payment, what three pieces of
information do you need to know?
2. How do taxes affect the overall total cost?
3. What components make up the total monthly housing
cost?
ESSENTIAL QUESTIONS
WHAT ARE YOU LEARNING? WHY ARE YOU LEARNING IT? HOW WILL YOU USE IT?