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 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