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IL-Chap. 3

Concepts of Home Ownership

Types of housing Apartment; condominium; cooperative, PUD, retirement communities; highrise developments; converted-use properties; manufactured housing; modular homes & timeshares
Basic costs to owning a home = PITI Principal, Interest, Taxes & Insurance = expenses that comprise a monthly payment.
Mortgage Terms 28%-mortgage payment, both principal & interest, plus taxes and insurance can not exceed 28% 36%=normally long term debt such as car payments, student loans or other loans can not exceed 36%
Current Market Value - Property Debt = Equity Equity= represents the paid-off share of property held free of any mortgage.
$500,000 is excluded from capital gains tax for profits on sale of principal residence by married taxpayers who file jointly. $250,000 who file singly Exemption may be used as long as homeowners have owned and occupied the property as their residence for at least 2 years of the past 5yrs.
Boot Any additional capital included in an exchange transaction to even out the value of the exchange is called a Boot and the IRS requires tax on the boot to be paid at the time of the exchange by the party who receives it.
Homeowners Insurance Policy = basic form fire & lightening glass breakage windstorm & hail explosion riot and civil commotion damage by aircraft, vehicles or smoke vandalism & malicious mischief theft loss of property removed due to fire
Homeowners Insurance Policy = broad form policy falling objects damage due to weight of ice, snow or sleet collapse of all or part of the building bursting cracking from steam or hot water accidental discharge from steam or AC unit freezing of plumbing from domestic appliances circuit damage
Subrogation when a third party (ins carrier typically) settles a claim they generally acquire the right to any legal damages available to the insured.
Coinsurance clause provision that requires owner to maintain (usually 80%) of the replacement cost of the dwelling. Owner may make a claim for full cost of the repair or replacement of damaged property.
Comprehensive Loss Underwriting Exchange = CLUE a database of consumer claim history that enables insurance companies to access prior claim information in the underwriting and rating process.
Created by: Denise Setchel