BU233 Chapter Notes - Chapter 7: Refinancing, Title Insurance, Second Mortgage
Document Summary
Interest earnings lost on money used on down payment/deposit: time and cost of commuting to work when you live in an area that offers less expensive housing, time/money spent on repairing a lower priced home. Loss of equity growth when you rent an apartment to be close to work. Advantages of renting: mobility: location change available when necessary, fewer responsibilities: not concerned with maintenance and repairs. Lower i(cid:374)itial costs: re(cid:374)t = first a(cid:374)d last (cid:373)o(cid:374)th"s re(cid:374)t, ho(cid:373)e = dow(cid:374) pay(cid:373)e(cid:374)t. Disadvantages of renting: few financial benefits: little control over rent price, money spent on rent could be used to build equity through home ownership, restricted lifestyle. Lenders use two ratios: gross debt service and total debt service: gds = shelter costs (principal interest, property taxes, heating costs)/ gross family. Income: tds = shelter costs + other debt payments / gross family income, other payments include potential payments.
