Mortgage

Interest, mortgage, deposit, profit

There are many advantages to owning your own home but it can be hard to get onto the 'property ladder' (meaning you start at the bottom and slowly upgrade your house). Many people struggle to get the money to pay for a deposit on a house. A deposit is a chunk of money you give to the seller or the bank to show that you're serious about buying the house. The deposit is usually a percentage of the total price of the house, and it's your way of saying, "I'm committed to buying this home." After you have paid a deposit you start paying the mortgage. Mortgage = the cost of the house + interest.

Why the amount of interest matters: The Mortgage Pizza Palour

 Imagine that a mortgage rate is like ordering pizza from different pizza parlors. Each parlor offers a unique pizza deal, representing different mortgage rates:

Parlor A: Offers a large pizza for a low price. This represents a low mortgage rate, like 3%. It's a fantastic deal!

Parlor B: Offers a medium pizza for a bit more. This represents a moderate mortgage rate, like 5%. It's still a good deal but costs a bit more.

Parlor C: Offers a small pizza for a higher price. This represents a high mortgage rate, like 7%. It's the most expensive option.

Explain that the cost of the pizza is like the interest you pay on your mortgage.

Parlor A (low rate) means you pay less interest above the cost of what you pay for the house, which is a great financial deal. 

Parlor B (moderate rate) means you pay more interest on top of the cost of the house, but it's still manageable.

Parlor C (high rate) means you pay a lot more interest as well as the cost of the house, which can be hard to manage.

✋ Reflection check-in ✋

There is a section you need to fill in in your workbook. You are reflecting on one thing you have learned about good loans and bad loans.