HousesPresented by: Ivan Huerta

Fundamental Laws of Financial Wealth!!1. Pay Yourself First by Paying the Principal.2. Live within your means!

Key Concepts are Learning Goals!!When it comes towards buying houses, many of us do not know where to start, what needs to be learned, or how to calculate costs to find the most optimal bundle. After the end of this presentation, you will learn:

Understand the following terms: Amortization, Principal, Interest, and so forth.

How to calculate the differences between a 15 year loan or 30 year loan on a house and see which loan is better to take out.

Differences between buying a house VS. renting a house.

Moneywise MeaningsAmortization

Monthly payment for a loan

PrincipalOriginal amount of loan.

InterestFee for borrowing money

EquityPrincipal paid.

AccelerationAdditional payments on the principal.

Deciding on a HouseSuppose you're searching for a house out in the suburbs. You

eventually find a house that is worth $100,000. You choose not to pay the full amount, so the only option is to take out a loan. There are two loans: a 15 year loan or a 30 year loan. If you chose the 15 year loan, you would have to pay $1074.61 a month. If you chose the 30 year loan, you would have to pay $877.58 a month. House A has a monthly payment of $877.58/month and House B has a monthly payment of $1074.61. House a provides a You then decide to either take out a 15 year loan or a 30 year loan. Which loan should you get based on the calculations you made to save money? What is the difference between the two loans?

Deciding on a House Continued Now try it on your own.

Suppose you're searching for a house out in the suburbs. You eventually find a house that is worth $150,000. You choose not to pay the full amount, so the only option is to take out a loan. There are two loans: a 15 year loan or a 30 year loan. If you chose the 15 year loan, you would have to pay $1704.90 a month. If you chose the 30 year loan, you would have to pay $1428.49 a month. House A has a monthly payment of $877.58/month and House B has a monthly payment of $1074.61. House a provides a You then decide to either take out a 15 year loan or a 30 year loan. Which loan should you get based on the calculations you made to save money? What is the difference between both loans?

Buying a House VS. Renting a HouseRenting a house has its advantages and disadvantages. The advantages are:

No Maintenance is Required.If the garbage disposal breaks or you need a plumber, getting maintenance is an

easy as calling the superintendent.

It’s Easier to Move.If you are not settled into your carer or could have an opportunity to relaocate in the

near future, it is much easier to switch to a month-to-month lease or sublet than it is to sell your home.

You can Avoid Owning a Depreciating Asset.While home prices have stabilized and are rising in most housing markets, there’s no

guarantee that your home will increase in value over time.

Buying a House VS. Renting a HouseDisadvantage are:

Your Monthly Payment Can Increase. Rents have been rising in many cities, so you may be facing an increase in your monthly housing payment as

soon as your current lease ends.

You don’t build Equity.

When you rent, your housing payment provides you with a place to live, but will not provide you with an asset to

sell when you are ready to move.

You don’t Receive Tax Benefits.Homeowners can deduct their mortgage interest payments and their property taxes from their federal income tax,

which reduces the final cost of homeownership. Renters cannot deduct any of their housing expenses.

You Can’t Paint or Remodel Without the Owner’s Approval.While some landlords are kind enough to let you paint your apartment, you’ll have to get their permission and

consult on the color. If you want to make other changes or upgrade an appliance you’ll have to put in a request with your landlord or apartment manager.

Buying a House VS. Renting a House Homeownership is not for everyone, but there are some financial and emotional advantages that can be enticing.It’s advantages are:

You can build Equity. Historically, homes rise in value anywhere from 4% to 6% per year. Even if your home doesn’t increase in value,

though, you’ll be building equity as you pay down your mortgage as long as your home maintains its value.

You can take advantage of tax breaks for homeowners.Homeowners can deduct their mortgage interest payments and property taxes when they itemize their federal

income taxes. These deductions offset the cost of your housing.

You housing payments will stay stable.If you choose a fixed-rate mortgage, your principal and interest payments remain the same for the duration of the

loan. However, your homeowner’s insurance and property taxes can change.

Buying a House VS. Renting a HouseYou may be able to use your home as an investment

If you buy a home and choose to leave it, you can rent it out rather than sell and generate income. This works best if you can cover your mortgage (or more) with rental payments. With this in mind, it pays to choose a home that will make a good rental property in the future.

You can Settle in a CommunityOnce you commit to owning a home, you are more likely to become more involved in your community because

you know you’ll be there for years. You can get to know your neighbors, perhaps join a homeowners’ association, or volunteer for projects that benefit the community or the local school.

You have the freedom to decorate as you please.

One of the joys of homeownership is the ability to change your environment to suit your tastes. Of course, if you

live within a development with a homeowners’ association you may have a little less freedom with your

home’s exterior, but you can still paint your kitchen purple if you like.

Buying a House VS. Renting a HouseDisadvantage of Buying a House.

You Have to Pay for Your Own Maintenance.

As a homeowner, you must spend time and money keeping your home in good repair. You need to set aside funds for unexpected expenses, such as appliances that break, a service contract on your furnace, or the need to replace your windows.

Your Home Is an Illiquid Asset.

If you would need to sell because of a job relocation or change in your circumstances, you may not be able to sell your home as quickly as you would like or for as much money as you want.

You Must Pay Property Taxes.

Property taxes can go up, making your home less affordable.

Your Home Could Lose Value.

As many people have learned the hard way, there’s no guarantee that your home will increase in value over time.

Buying a House VS. Renting a HouseBuying a Home Requires a Cash Investment.

You need to use up your savings for a down payment and closing costs and for other

expenses of homeownership. That cash won’t be available for other investments.

Homeowners’ Insurance Is Mandatory If You Have a Mortgage.

As a renter,renter’s insurance is recommended but not required. Your lender requires

you to insure your residence, and typically you have to pay those insurance

premiums along with your mortgage payment.

Moral StoryWhen it comes towards buying a house, remember to understand what you are getting into and be prepared for the payments. :)

Questions/Comments/ConcernsThe End….. Or is it.

No it is. LOL