Chapter 5.3, Problem 1R

Solution

To Explain : Significance of given terms are to be explained.

Lease : Lease is defined as the agreement which is made when the property is rented. When a lender decide to rent a property , the tenant sign a lease or contract. Tenant should read the lease very carefully. The lease is mostly for one to three years or if a tenant want to have a lease for six or nine months, it will be given after paying some extra amount.

Security Deposit : When the tenant sign a lease , it should provide security deposit to hold to the landlord at the time of signing a lease in case the rent is not paid or any damaged to the property. Security is basically the one month rent of the rented property and which can be given back when the tenant moves out. Also, the returned amount is depend upon the condition of the property which was discussed at the time of giving property.

Closing Costs : When a person purchase a property, apart from the down payment, person needs to have funds for closing costs . These costs are arranged at the time of mortgage or transferring of ownership of property. These costs includes legal costs, loan application, credit report, taxes title search and house inspections.

Points : At the time of arranging a mortgage , it is necessary to know about the points. Points are defined as the amount that is paid to the lender and computed as a percentage of loan. Point is calculated as the amount charged by lender which is equal to the amount borrowed. The points usually charged by the lender is one to four when lender believes that current interest rates is not that much high for paying the expenses involved and still they make profit. At the time of higher interest rates, the lender may waive point to attract the buyers. Also, borrower should try to negotiate points with the lender.