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Basics Beginner: Home Ownership

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1.
Your cost basis equals the sales price of your house minus what you paid for it.
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False. Your cost basis is what you paid to buy AND upgrade your home.
2.
The current market value of your home, minus what you owe on it, is commonly known as your _________.
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Home equity. Your home equity is the difference between what you own (the current market value of your property) and what you owe on the property.
3.
Mortgage lenders may require that you purchase which of the following forms of insurance?
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Hazard and title insurance. Lenders may require that you purchase hazard and title insurance, but may not require you to buy life insurance.
4.
Points are a pre-payment of principal.
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False. Points are a pre-payment of interest.
5.
Because fixed-rate mortgage payments are amortized, the percentage of each payment that is applied to interest _______.
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Decreases with time. With an amortization schedule, the portion of each monthly payment applied to interest decreases as your equity grows.