Directions and Rubrics –Life Skills II Real Estate, Automobiles, & Investments
Purpose
The Life Skills Project II is designed to be an activity that will give each student the tools to immediately begin creating a sound, financial foundation. The project will focus on three areas: Real Estate-Automobiles-Investing. Real Estate and Automobiles are normally the greatest financial investment individuals make during their lifetime. Information the student will receive will help to make wise economical decisions in these two areas. Investment is what you do with your savings, and is the economic foundation for your life.
Starting Date: Final Due Date: Total Points for Project Total Grade Weight: Grade
Monday(A),Tuesday(B) Monday(A),Tuesday(B)
March 17,18 April 7,8 Points: 100 25% of the Six Weeks
IMPORTANT: Graded sections are due for full credit on the due date. One day late results in a 50 as being the highest possible late grade. More than one day late results in a grade of 2 when turned in. The student will use the Life Skills I Project folder that was turned in during the first six weeks. Make a new cover sheet to go at the end of LS I (after the one page summary from LSI) that contains the following information: Life Skills Project II- Real Estate, Automobiles, & Investments Your Name Class Period
FOLDER: On the cover print the title “Life Skills Project” (Use LSI Folder) COVER PAGE: It must contain the title “Life Skills Project II- Real Estate, Automobiles, &
Investments”, your name, and your period number. It must be typed. Feel free to enhance the cover page if you would like.
PROJECT DIRECTIONS: (this page) Packet A REAL ESTATE NOTES (3 pages) Packet A REAL ESTATE LAB (3 pages) Packet A AUTOMOBILE NOTES (2 pages) Packet B AUTOMOBILE LAB (3 pages) Packet B INVESTMENT NOTES (2 pages) Packet C INVESTMENT LAB (4 pages) Packet C ONE PAGE SUMMARY/EVALUATION: Typed, no heading, 1” margins, size 12 font,
double-spaced. Suggest you go into the second page to make sure it is over 1 page. Not to exceed 1 ½ pages. Discuss your overall view of the project: What are 3 things that you learned? List 3 ways that you plan to use this information in your future? What is the one activity that you enjoyed the most? The least? What would you change if you were the teacher? (Be Specific) Share any other important information you think we should know. **Your input is very important for future changes in this project.**
Print Name: ______________________ Sign Name : _______________________
Date: ___________
Life Skills Buying Vs. Renting
Buying Housing Choices: Single-family Housing- This home is ____________ from surrounding homes and has some ________ around it. This is usually the most ___________ type to buy and maintain. Owners are responsible for ___________ & _______ _______ _________. Town HomesThis is a house of _____ or more floors with a front yard & backyard, but with _____________ sidewalls. Advantages include: ___________ of construction, saves on the amount of __________, insulation, windows, foundation, roof, and walls needed which makes it less expensive to buy & maintain. Disadvantage is ________ often carries through the common wall. Condominiums- This is a __________ unit in an apartment building or in a series of town houses that is owned separately. Common areas include hallways & the _______ on which the building is built. Owners pay a monthly _____________ fee for upkeep of these common areas. Owners are free to make changes __________ their own units, but the exterior changes are determined by a majority vote of the owners of all the units. Mobile Homes- These are a popular form of ________ - _______ housing in the U.S because they are the least expensive form of housing to buy and maintain. They are sometimes taxed as a _________ ___________ rather than as real estate. Problems include that __________ in a mobile home park may not be available, they are more likely to suffer ___________ during storms, like auto‟s & boats they ____________ in value over time.
Lender‟s Rules: Rule 1- Purchase Price ÷ Annual Incomes = 2.0 or less Rule 2- Mortgage Payment ÷ Monthly Take-Home Income = Less than ________ Rule 3- Loan Amount ÷ Value of the Housing = ________or less (often 80%)
Types of Mortgages: Standard Fixed-Rate Mortgage- Interest rate and monthly payments remain the ________ over the term of the mortgage. Term is fixed, usually ___ or ___ years. Flexible Rate Mortgage-The interest rate and monthly payments _________ up or down along with interest rates in general. There is usually a ______ of a few percentage points over the life of the mortgage, while there may not be a limit of how low it can go. An example of this is an ___ ___ _____ or Adjustable Rate Mortgage. Federal Housing Administration (FHA) Mortgage-The FHA will _________ the entire amount of the mortgage making it possible for the borrower to obtain a larger loan than they would have received with an uninsured loan. Veteran‟s Administration (VA) Mortgage- Veterans are eligible for low interest rate loans where the VA guarantees the loan and allows vets to purchase homes with no __________ down payment. Mr. Weems‟ Law of Owning A Home- As soon as you possibly can, you should purchase a home you can afford, on a _____ year or less loan, & never ________ your homes-turn them into ____________ properties as you move up in your housing needs. Renting Advantages: Greater ___________ - do not have to worry about trying to sell property if you must leave quickly A feeling of _____________ to choose another place to live if dissatisfied with current rental unit. Having to pay only a small ____________ __________ rather than a large outlay of money for a down payment No direct maintenance costs or real estate taxes or _______________. A good credit rating if rent paid on time. More money for other ______________ because monthly rental payments are often less than monthly mortgage payments No temptation to overspend on home _______________. Disadvantages: No freedom of _______ because renters may not remodel or even paint without permission No return on __________ money. Little or no _______ benefit Often less _____________. Little feeling of _______________ for seeing that the property is well taken care of. No property use as _____________. Need to wait for maintenance work at the ______________ of the owner, No building of __________.
Clauses in Rental Leases to Avoid: Inability-To-Sue-Clause-You give up your right to sue. Forbid hanging pictures, no overnight guests, no subleasing, able to cancel your lease if you are one day late paying the rent but hold you responsible for paying the rent for the life of the lease, allow the owner to enter your apartment when you are not home, make you legally responsible for all repairs, make you obey rules that have not yet been written Try to Have These Clauses Included: If rental agent says apartment comes with dishwasher, garbage disposal, & air conditioner, make sure the lease lists them. If you are promised the use of a parking lot, swimming pool, recreation room, etc. make sure the lease states this and that it says you do not have to pay extra to use them. If the rental agent promises to paint or make improvements, make sure it is in the lease. Require a “Moving Clause”, that if you are required to move more than 50 miles from your apartment, that you can cancel your contract-you may have to pay one months rent for a clause like this but it is worth it. If you plan to put in shelves, lighting fixtures etc. and you plan to take them with you, put it in the lease. **Remember, no court will recognize any verbal commitments-they must be in writing, no matter what the rental agent says.** Things to note upon initial inspection: Do all faucets, toilets, outside faucets work and not leak? Note all scratches on woodwork. Note any dings in the linoleum or floors. Are all light bulbs working (inside & out)? Any stains on the carpet, cracks in walls or ceilings, broken mirrors or cracked window panes? Do all appliances work? Does the A/C and heating work? Check the attic. Any damage done by a previous owner‟s pet? **IMPORTANT: Always take pictures before you move in of any damages and note them in writing to the rental agent, keeping a copy for yourself. Date the pictures and the damages sheet. Take pictures after you clean up the apartment when you are leaving and date them also. This will normally assure you will get your deposit back.**
LIFE SKILLS-REAL ESTATE ACTIVITY
Objective: The objective is to introduce to the student the importance of being able to use an Amortization Schedule in purchasing property. The student will be able to calculate principal and interest on loans at varying interest rates and payment schedules. The student will use http://ray.met.fsu.edu/~bret/amortize.html for the loan calculations. Once you get to this page, use the Amortization Calculator to complete scenarios #1-3. The following bullet points will help you fill in the calculator to complete the activity. Click/check the box which says „Show Amortization Schedule‟. The Principal is the amount borrowed for the loan. The Annual Interest Rate is the charge for borrowing money on a loan; it is expressed as a percentage (%). Leave the „Balloon Payment‟ box empty. Leave the „Payments Per Year‟ at 12; this means that you will make one payment per month. For the „Number of Regular Payments‟ box, you will enter 360 for a 30year loan, or 180 for a 15-year loan. The „Payment Amount‟ will be calculated for you after you click on „Calculate‟.
Definitions you need to know: Amortization Schedule: A schedule that figures monthly mortgage payments with the principal and interest, and shows impacts of extra mortgage payments. Escrow: The amount of money above the principal and interest that is put aside to pay for mortgage insurance and taxes. This money is added to your principal and interest payment and held to pay the mortgage insurance and taxes at the end of the year. Your goal is to get 20% equity in your house so you can put aside your own money to pay the insurance and taxes-this way you make the profit (interest) on your money while it is being saved to pay taxes and insurance.
Scenario One:
A student attending Texas A&M University is able to purchase a two-bedroom condominium for $22,500 within 2 miles of campus. Using the Amortization Calculator, you will calculate the principal and interest payments for: A. 30 year loan (360 payments; 1 per month) with an interest rate of 6.10% B. 15 year loan (180 payments; 1 per month) with an interest rate of 5.77% Enter the information into the calculator and press „Calculate‟. A chart will appear showing you the payment schedule for your loan. Record the following information.
30 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid 15 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid
$__________ $__________ $__________ $__________ $__________ $__________
What is the difference (amount) between the monthly mortgage payment on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total interest on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total cost (repaid) on a 15 Yr loan versus a 30 Yr loan? $__________ Scenario Two:
A high school graduate is planning to live and work in the Austin area and would like to be able to purchase a one-bedroom condo for $65,000. Using the Amortization Calculator, you will calculate the principal and interest payments for: A. 30 year loan (360 payments; 1 per month) with an interest rate of 6.10% B. 15 year loan (180 payments; 1 per month) with an interest rate of 5.77%
30 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid 15 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid
$__________ $__________ $__________ $__________ $__________ $__________
What is the difference (amount) between the monthly mortgage payment on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total interest on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total cost (repaid) on a 15 Yr loan versus a 30 Yr loan? $__________
Scenario Three:
You are planning to live and work in the Austin area and would like to be able to purchase a three-bedroom house for $130,000. Using the Amortization Calculator, you will calculate the principal and interest payments for: A. 30 year loan (360 payments; 1 per month) with an interest rate of 6.10% B. 15 year loan (180 payments; 1 per month) with an interest rate of 5.77%
30 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid 15 Year Loan Payment Amount (Monthly) Total Repaid Total Interest Paid
$__________ $__________ $__________ $__________ $__________ $__________
What is the difference (amount) between the monthly mortgage payment on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total interest on a 15 Yr loan versus a 30 Yr loan? $__________ What is the difference between the total cost (repaid) on a 15 Yr loan versus a 30 Yr loan? $__________ Answer the following questions: 1. Why would a person choose a 15 Yr loan instead of a 30 Yr loan? _________ ________________________________________________________________ 2. Why would a person choose a 30 Yr loan instead of a 15 Yr loan? _________ ________________________________________________________________ 3. Go to: http://www.bls.gov/oes/current/oes_nat.htm. This website lists national wage estimates for many occupations in this country. Scan through the occupation list. Choose the job that you would like to have in the next 5-10 years. What is the mean annual income for the occupation? $ __________ per year. Calculate the monthly salary for the occupation. $ __________ per month. (Mean Annual / 12= Monthly Salary) If you should only use 30% of your monthly salary for housing, how much can you spend on your mortgage payment? $ __________ per month. (Monthly Salary X .30= Housing Payment) What is the most expensive home that you can purchase for yourself if you follow the 30% rule and borrow the money on a 15 Yr loan? $ ____________ (Hint: Work backwards using the amortization calculator; the interest rate on a 15 Yr loan is 5.77%) 4. List 2 things that you learned from this activity in space below. ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________