【正文】 efamily homes to large, highrise apartment plexes containing several hundred units. Renting does e with restrictions, however. For example, you may not be allowed to have a pet or make changes to the unit’s appearance. Chapter 5 41 The Rental Option Many people choose to rent rather than buy their home. For example, young adults usually rent for one or more of the following reasons: (1)they don’t have the funds for a down payment and closing costs, (2) they’re unsettled in their jobs and family status, (3) they don’t want the additional responsibilities associated with homeownership, Chapter 5 42 or (4) they believe they can afford a nicer home later by renting now because housing market conditions or mortgage rates are currently unattractive. A big drawback of renting is that the payments are not tax deductible. Chapter 5 43 The RentorBuy Decision Owning a home is not always more costly on a monthly basis than renting, although there are many other factors to consider before making this important decision. The economics of renting or buying a place to live depends on three main factors: (1)housing prices and mortgage interest rates, (2) tax writeoffs for homeowners, and (3) the expected increase or decrease in home values over time. Chapter 5 44 LG4 HOW MUCH HOUSING CAN YOU AFFORD? Buying a home obviously involves lots of careful planning and analysis. Not only must you decide on the kind of home you want (its location, number of bedrooms, and other features), you must also consider its cost, what kind of mortgage to get, how large a monthly payment you can afford, what kind of homeowner’s insurance coverage to have, and so forth. Chapter 5 45 Benefits of Owning a Home Homeownership is important to most people, whether they own a detached home or a condominium. It offers the security and peace of mind derived from living in one’s own home and the feeling of permanence and sense of stability that ownership brings. This socalled psychological reward is not the only reason people enjoy owning their home. There are also financial payoffs from homeownership. Chapter 5 46 ? Tax shelter: As noted in Chapter 3, you can deduct both mortgage interest and property taxes when calculating your federal and, in most states, state ine taxes, reducing your taxable ine and thus your tax liability. The only requirement is that you itemize your deductions. This tax break is so good that people who have never itemized usually begin doing so after they buy their first house. Chapter 5 47 Also keep in mind that, for the first 15 to 20 years of ownership (assuming a 30year mortgage), most of your monthly mortgage payment is made up of interest and property taxes—in fact, during the first 5 to 10 years or so, these could well account for 85% to 90% of your total payment. This allows you to write off nearly all of your monthly mortgage payment. Chapter 5 48 ? Inflation hedge: Homeownership usually provides an inflation hedge because your home appreciates in value at a rate equal to or greater than the rate of inflation. For example, from 2022 through 2022, a home became one of the best investments you could make, generating a far better return than stocks, bonds, or mutual funds. Many people bought homes simply for their investment value. Chapter 5 49 The low inflation coupled with low mortgage rates resulted in rapid appreciation in home prices during that period. However, housing values on average dropped more than 20% between 2022 and 2022. Whether a real estate market is ―hot‖ or ―cold‖ is literally a matter of supply and demand. More subdued expectations in the wake of the financial crisis of 2022 are that housing prices will roughly keep pace with the rate of inflation for the foreseeable future. literally [?lit?r?li] ，照字面地；真正地；簡直 subdue [s?b?dju:] ，使順從，征服；抑制，克制 Chapter 5 50 The Cost of Homeownership Although there definitely are some strong emotional and financial reasons for owning a home, there’s still the question of whether you can afford to own one. There are two important aspects to the consideration of affordability: You must produce the down payment and other closing costs, and you must be able to meet the cashflow requirements associated with monthly mortgage payments and other home maintenance expenses. Chapter 5 51 In particular, you should consider these five items when evaluating the cost of homeownership to determine how much home you can afford: the down payment, points and closing costs, mortgage payments, property taxes and insurance, and maintenance and operating expenses. Chapter 5 52 The Down Payment The first major hurdle is the down payment. Most buyers finance a major part of the purchase price of the home, but they’re required by lenders to invest money of their own, called equity. hurdle [?h?:dl]，欄架；障礙，困難 The actual amount of down payment required varies among lenders, mortgage types, and properties. To determine the amount of down payment required in specific instances, lenders use the loantovalue ratio, which specifies the maximum percentage of the value of a property that the lender is willing to loan. Chapter 5 53 For example, if the loantovalue ratio is 80%, the buyer will have to e up with a down payment equal to the remaining 20%. e up with 提出，想出，提供 Chapter 5 54 If you don’t have enough savings to cover the down payment and closing costs, you can consider several other sources. You may be able to obtain some funds by withdrawing (subject to legal limitations) your contributions from your pany’s profitsharing or thrift plan. Your IRA is another opti