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Published byAmanda Griffith Modified over 7 years ago
Leaving Certificate 1 © PDST Home Economics
Mortgage A mortgage is a loan from a lending agency to buy a house The loan is usually repaid in monthly instalments over a fixed period of time between 20 – 30 years The lending agency (e.g. bank) holds the title deeds of the house until the loan is repaid in full 2
Conditions that apply when borrowing: 1. Amount which may be borrowed. Usually 2-3 times your annual salary. If joint, the principle salary is taken into account. 2. Deposit – must have saved approx 10% of amount to be borrowed 3
Conditions that apply when borrowing: 3. Income – must supply proof of income 4.Good credit record – no bad debts 5.Term of loan – most loans repaid over 20-25 years, older applicant over shorter term 6.Insurance – must take out life assurance 7.The property – must be in good condition, house surveyed by lending agency 4
Fixed rate The rate is fixed for a set period (1-20 years) Less risky but more expensive Know the exact amount owed each month Variable rate Interest rates rise and fall Pay more if rate rises Pays less when rate drops 5
Annuity- Most popular Each repayment goes partly to pay off interest on the loan and partly repay principal amount borrowed Amount owed declines over the years A mortgage protection policy is a condition of an annuity mortgage 6
Endowment – Less popular Combination of borrowing and investing Pay interest on loan Pay money towards a savings type life assurance policy which pays off loan Risk – amount saved may not be enough to pay off loan No extra mortgage protection policy needed 7
Pension-linked mortgage Popular with the self-employed as better tax relief Pays interest on the loan and Pays money into a pension scheme Loan is repaid from the pension fund upon retirement 8
Allowed at standard tax rate only – 20% 1 st –time buyers get extra mortgage interest relief during the first 7 years. 9
10 Local authorities provide housing for people who cannot afford it from their own resources. A range of schemes to help o buy or o rent or o improve existing living conditions
Must be in need of housing and unable to provide from your own resources Must be unable to secure a mortgage from a bank or building society Must take income eligibility test Loan repayments relate to income Up to 95% of house price may be borrowed 11
Tenant purchase scheme Anyone who has been a tenant of a L.A. house for at least 1 year has the option of buying that house May be bought outright or through shared ownership scheme House priced at market value Discount for each year of tenancy up to max of 10 years 12
Shared ownership scheme Must be in need of housing and satisfy income test Ownership is shared between shared owner and L.A. Applicant must purchase at least 40% of house and rent the remaining 60% from L.A. May buy remaining 60% when 40% paid for 13
Affordable housing scheme The L.A. provides new houses on land that it owns. Houses at discounted prices. Purchased outright through mortgage provided by L.A. Loans up to 95% paid over 25 years 14
Mortgage Allowance Scheme A tenant wishing to return their home to L.A. and to buy or build a private home may qualify Allowance paid on a reducing scale over 5yrs. to the mortgage lender thereby reducing payments over initial period Makes transition from rent to mortgage easier 15
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