8.3 THE COST OF BUYING A HOME It’s a great feeling when you buy your first

house, but it comes with expenses that you didn’t have to worry about when you rented

Despite having more expenses, it’s worth it:

PROPERTY VALUES

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PROPERTY VALUES

HOUSE PRICES The price of a house can be affected by

many things, two big ones which are:LocationSize

Both of the above factors determine the property taxThe more expensive a house, the more

property tax you have to pay

SAMPLE SCENARIOLois and Clark have owned a 3-bedroom bungalow for 12 years. They make weekly mortgage payments of $214.88. They make quarterly payments for property taxes of $945. They have a separate bank account for home repairs and put $250 into this account each month. They receive bills for electricity, natural gas, water, home insurance, satellite television, telephone and internet access. The average monthly total for these expenses is $560. Calculate Lois & Clark’s total annual expenses associated with the house, to the nearest thousand dollars.

LOIS & CLARK’S ANNUAL HOME EXPENSESEXPENSE AMOUNT FREQUENCY TOTAL

Mortgage $214.88 Weekly 214.88 x 52 = $11 173.76

Property Taxes

$945 Quarterly 945 x 4 = $3780

Home Repairs $250 Monthly 250 x 12 = $3000

Utilities & Other Bills

$560 Monthly 560 x 12 = $6720

TOTAL: $25 000! THINK !

So how much does your net income need to be in order to pay $25 000 a year for house expenses alone?

SO YOU WANT TO LIVE IN A CONDO?

Doug is retired with a fixed income of $1900 per month. He lives in a one-bedroom condominium in a five-story building. His mortgage payment is $618/month. The condo/common fees are $325/month. He also receives a bi-monthly electricity bill for $130 and a quarterly water bill for $180.1. Doug’s fixed monthly accommodation

expenses: $618 + $325 = $943/month2. Doug’s average monthly utility expenses: ; $65 + $60 = $125

SO YOU WANT TO BUY A CONDO CONT’D.

3. On average, what percent of his income does Doug spend on monthly accommodations costs?Doug’s Income: $1900/monthAccommodations Costs: $943+$125= $1068/monthPercent of Income: therefore Doug spends ~56% of his income on accommodationsOn average, how much of Doug’ income is left over?$1900 - $1068 = $832

8.3 HOMEWORK p. 465 #1, 2, 7, 8, 11