Where To live?
Mortgages
• What is a mortgage?
Discuss
Mortgages
• A mortgage is a long-term loan which you pay back
monthly over an agreed length of time, usually 25 years.
The main types of mortgages are:
• Repayment – you pay back the interest and some of the
money you have borrowed each month so that you will
have repaid the entire amount over the period.
• Endowment – you pay the interest only over the period
of the loan. At the same time, you take out an insurance
policy into which you pay enough money to build, with its
investment income, a large-enough lump sum to pay off
the mortgage at the end of the agreed term. So every
month you make an interest payment and an insurance
payment.
How much to borrow?
• Depending on your income and
circumstances, you can borrow anything
up to 100 per cent (sometimes more) of
the value of the property - but if you're a
first time buyer you'll usually only be
offered up to 90 or 95 per cent. If buying
you need to find a deposit to cover the
difference between the purchase price and
your mortgage.
How much to borrow?
• A single person would be unwise to
borrow more than three times their annual
income. If you were buying with another
person, a sensible figure would be up to
three times your joint income.
• In some cases you can borrow more, we
are allowing five times your salary.
• Fill in Mortgages sheet
Three main reasons to buy
• It may be less expensive than renting a
comparable property (rents tend to go up
with inflation).
• A home of your own generally offers more
in terms of use value; for example, it may
offer greater security and the opportunity to
‘do your own thing' in terms of decoration,
renovation and house style.
• It can be an attractive long-term investment
Three main reasons to rent
• Can not afford to buy a house.
• Upkeep of the property is the landlords
responsibility.
• You are not tied down to one area.
To Rent or to Buy?
• You now have an idea of how much
money you have to spend and how much
a mortgage will cost.
• Now its time to find somewhere to live use
you homework notes to make a decision
as to whether you are going to rent or buy
and decide where you are going to live.
• Be warned!!!!! Do not use all of your salary
as you still have bills to pay.
Researching the market…
Look at the estate agents advertisements and
fill in the details of
 three houses to buy
 three houses to rent
In your booklet.
Property One
Location
Monthly Cost
Salary left
Details
Tax Band
Property Two
Property Three
Homework
• Write down what you think the other costs
will be.
• Estimate a cost for these.