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HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Objectives o Become aware of and learn how to calculate the expenses involved in buying a car. o Become aware of and learn how to calculate the expenses involved in buying a house.

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Expenses in Buying a Car Purchase Price:The selling price agreed on by the seller and buyer. Sales Tax:A fixed percent that varies from state to state. License Fee:Fixed by the state, often based on the type of car and its value. Obj 1: Applications: Buying a Car

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Example 1: Applications: Buying a Car You are going to buy a used car for \$8500. The bank will loan you 70% of the purchase price, but you must pay a 6% sales tax and a \$150 license fee. How much cash do you need to buy the car?

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Example 1: Applications: Buying a Car (cont.) Solution You need \$3210 cash to buy the car. a. Calculate the down payment (30% of \$8500, since the bank will loan you 70%). \$8500 x0.30 \$255 00 b. Calculate the sales tax (6% of \$8500). \$8500 x0.06 \$51 00 c. Add all the cash expenses. \$2550.00 51 00 +15 00 \$321 00 Down payment Sales tax License fee Total cash needed

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Expenses in Buying a Home Purchase Price: The selling price (what you have agreed to pay). Down Payment: Cash you pay to the seller (usually 20% to 30% of the purchase price). Mortgage Loan (first trust deed): Loan to you by a bank or a savings and loan (difference between purchase price and down payment). Mortgage Fee (or points): Loan fee charged by the lender (usually 1% to 3% of the mortgage loan). Fire Insurance: Insurance against the loss of your home by fire (required by almost all lenders). Continued on next screen… Obj 2: Applications: Buying a Home

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Expenses in Buying a Home (cont.) Recording Fees: Local and state fees for recording you as the legal owner. Property Taxes: Taxes that must be prepaid before the lender will give you the loan (usually 6 months in advance). Legal Fees: Fees charged by a lawyer or escrow company and/or title search company for completing all forms in a legal manner. Obj 2: Applications: Buying a Home (cont.)

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Example 2: Applications: Buying a Home You buy a home for \$150,000. Your down payment is 20% of the selling price, and the mortgage fee is 2% of the new mortgage. You also have to pay \$500 for fire insurance, \$350 for taxes, \$50 for recording fees, and \$310 for legal fees. What is the amount of your mortgage? How much cash must you provide to complete the purchase?

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Example 2: Applications: Buying a Home (cont.) Solution a. Calculate the down payment \$150,000 x 0.20 \$30,000.00 b. Calculate the mortgage and the mortgage fee (2% of mortgage). \$150,000 –3 000 \$12 000 Selling price Down payment Mortgage Selling price Down payment Mortgage Mortgage fee \$120,000 x 0.02 \$240 00

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Example 2: Applications: Buying a Home (cont.) Solution The mortgage will be \$120,000, and you will need \$33,610 in cash. c. Add all the cash expenses. \$30,000.00 240 00 50 00 35 00 5 00 +31 00 \$33,610.00 Down payment Mortgage fee (loan fee) Fire insurance Taxes Recording fees Legal Fees Cash to complete purchase

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Self-Check 2: Applications: Buying a Home You want to buy a home for \$175,000. Your down payment is 10% of the selling price, and the mortgage fee is 1% of the new mortgage. You also have to pay \$350 for fire insurance, \$400 for taxes, \$45 for recording fees, and \$500 for legal fees. What is the amount of your mortgage? How much cash must you provide to complete the purchase?

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Self-Check 2: Applications: Buying a Home (cont.) Solution a. Calculate the down payment \$175,000 x 0.10 \$17,500.00 b. Calculate the mortgage and the mortgage fee (2% of mortgage). \$175000 –17,500 \$15 500 Selling price Down payment Mortgage Selling price Down payment Mortgage Mortgage fee \$157,500 x 0.01 \$1575.00

HAWKES LEARNING SYSTEMS math courseware specialists Copyright © 2011 Hawkes Learning Systems. All rights reserved. Self-Check 2: Applications: Buying a Home (cont.) Solution The mortgage will be \$157,500, and you will need \$20,370 in cash. c. Add all the cash expenses. \$17,500.00 1575.00 350.00 40 00 45.00 +500.00 \$20,370.00 Down payment Mortgage fee (loan fee) Fire insurance Taxes Recording fees Legal Fees Cash to complete purchase