Understanding Home Financing
Build progressive financial capability through understanding home financing, moving from understanding to confident application.
5
Lessons in this module
Principal Interest and Term
Principal, interest rate, and term together determine a mortgage payment, and changing any one changes the payment and the total cost. A larger deposit, a lower rate, or a shorter term each reduce what is paid — and all three should be modelled before committing.
Fixed Versus Variable Rates
Compare a fixed-rate and variable-rate mortgage by explaining the certainty versus flexibility trade-off — and identify which is more appropriate for a borrower with a given income stability profile.
Down Payment Trade-Offs
A larger deposit lowers borrowing costs but ties up cash, while a smaller deposit preserves liquidity for emergencies and post-completion costs. The right balance keeps a meaningful reserve rather than committing every available unit to the deposit.
Closing and Ownership Costs
Buying a property carries costs beyond the deposit — legal fees, valuation, survey, and insurance — that fall due at completion and cannot be added to the mortgage. Budgeting roughly 3–5% of the price separately prevents a last-step shortfall.
Stress-Test Affordability
A personal stress test — the mortgage payment as a share of net income under a lower-income or higher-rate scenario — reveals whether the borrowing is genuinely sustainable, regardless of what a lender approves.
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