senior seminar mr. bernstein housing finance february 2-4, 2015

Senior Seminar

Mr. Bernstein

Housing Finance

February 2-4, 2015

2

Housing and LifestyleFeatures

Living space desiredAcreageCommutingBudget

Life PhaseRenting vs. buying

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

3

Housing and Lifestyle Advantages DisadvantagesRenting an Apartment Easy to move

Low maintenanceLow financial commitment

No tax advantageLimitations on activitiesLess privacy

Renting a House Easy to moveLow maintenanceLow financial commitment

Higher utilities expensesSome limits on activitiesNo tax advantage

Owning a House Pride of ownershipMore spaceTax benefits

Financial commitment/riskHigh living expensesLimited mobility

Owning a Condominium

Pride of ownershipLower maintenanceTax benefitsAccess to recreation and business

Financial commitment/riskLess privacy than a houseNeed to get along with othersLess space than a house

Owning a Mobile Home

Less expensive than house Lower quality than house


Mr. Bernstein

4

Renting+ Mobility+ Fewer Responsibilities+ Low upfront costs- Lifestyle restrictions

Rental Agreements and Leases


Mr. Bernstein

5

Tenant’s Rights and DutiesRight of Possession

Landlords generally do not have right to enter and inspect unless stated in lease

Right to Use PropertyRight to Assign or Sublet

Tenant remains responsible toward landlordDuty to pay rent in timely fashionDuty to take reasonable care of property (record condition before moving

in)Duty to notify landlord of needed repairsTort liability to guests (purchase renter’s insurance)


Mr. Bernstein

6

Landlord’s Rights and DutiesRight to receive rent in timely fashion

Rent due even if tenant vacates earlyRight to regain possession at end of leaseDuty to maintain common grounds of multi-unit

buildingDuty to maintain housing codeDuty to pay property taxes


Mr. Bernstein

7

Types of HousingSingle-Family - UnattachedMulti-Family – Duplexes, Townhouse, 4-flats, etc.Condominiums – similar to apartments but owned, not rentedCoops – Apartment building owned by residentsMobile Homes – Inexpensive, popular in some climates


Mr. Bernstein

8

Mortgage FinancingLong-term collateralized loanMost common lengths are 15 and 30 yearsFailure to make payments can result in foreclosure, or

taking possession of property by lenderAmortization is the amount of principal paid each month; small at first and increases over time. Why?


Mr. Bernstein

9

Mortgage FinancingInterest Rates, Points and APR (Annual Percentage Rate)$100,000 loan with 1 point and 5% interest rate

Amount borrowed is $99,000; APR is 5.09%$100,000 loan with 4 points and 4.5% interest rate

Amount borrowed is $96,000; APR is 4.85%Which is the better deal?...

Over 30 years, the latter deal has lower APR…but…If you move in 5 years, the points are spread over fewer

years and the APRs are 5.41% and 6.12%!!


Mr. Bernstein

10

Mortgage FinancingClosing costs other than Points and misc. lender fees*

Title Search Fee ($300)Title Insurance ($1400)Attorney’s Fee ($500)Property Survey ($700)Appraisal Fee ($400)Termite or other Inspection Fees ($100)Real Estate Agent Commission (paid by seller; 3-6%)

* - Average 2012 New Jersey costs from:http://www.bankrate.com/finance/mortgages/2012-closing-costs/new-jersey-closing-costs.aspx


Mr. Bernstein

11

Mortgage FinancingARMs: Adjustable Rate MortgagesTypical terms: low rate for 1, 2 or 5 years, then an adjustment to a spread over a common floating rateExample: 2% for 5 years, then LIBOR + 2.5%Rate may be cappedDiscounted rate in early years is paid for by accepting risk of rising rates in later yearsInteresting if you plan to move within a few years…but if not, beware…the adjustment can be dramaticARMs caused many bankruptcies in 2008 crisis


Mr. Bernstein

12

Mortgage FinancingImportant TermsEquity: Value of home minus amount still owedHome Equity Loan: “Second Mortgage”Refinancing: New mortgage, pays off old mortgage,

often establishes a lower or fixed rateEscrow Account: Many mortgage lenders will require Property Tax money be paid into a trust account with house payments


Mr. Bernstein

senior seminar mr. bernstein housing finance february 2-4, 2015

Documents