FHCE 3200 Lecture Notes - Lecture 12: Radiation And Nuclear Safety Authority, Rieti, Liability Insurance

• School: University of Georgia
• Department: Financial Planning, Housing and Consumer Economics
• Course: FHCE 3200
• Professor: Goren

Document Summary

Ca(cid:374)"t afford ho(cid:373)e: a(cid:448)g. ho(cid:373)e = 94k i(cid:374) (cid:1006)(cid:1004)(cid:1005)6. Mortgage insurance protects bank from your default. Generally goes away once equity > 20% (cid:862)poi(cid:374)ts(cid:863) are e(cid:454)tra payments to lower interest. Mortgage de(cid:271)t also high (cid:271)e(cid:272)ause it is (cid:862)good(cid:863) Mortgages fix most of monthly home cost (vs. renting, where costs rise) Mortgage interest is usually low, allowing opportunity for leverage: leverage = use debt to (hopefully) increase returns, borrow at a low rate, invest at a high rate. Increase risk (debt rate fixed; investment rate variable) Do (cid:374)ot (cid:271)u(cid:455) a ho(cid:373)e as a(cid:374) (cid:862)i(cid:374)(cid:448)est(cid:373)e(cid:374)t(cid:863) American homes appreciate ~2. 5% historically: barely beating inflation, about one third return vs. the stock market. Front end ratio: housing expenses (piti) to be less than or equal to 25-28% of your monthly gross income. Back end ratio: housing expenses + long term debt to less than or equal to 33-36% to your monthly gross income.