Factors to Consider When Deciding to Buy or Rent a Home

Personal Finance

Contents
Question 1........................................................................................................................................3
1.1...........................................................................................................................................3
1.2...........................................................................................................................................3
1.3...........................................................................................................................................4
Question 2........................................................................................................................................5
2.1...........................................................................................................................................5
2.2:..........................................................................................................................................5
2.3...........................................................................................................................................6
2.4...........................................................................................................................................6
Question 3........................................................................................................................................7
3.1...........................................................................................................................................7
3.2...........................................................................................................................................7
3.3...........................................................................................................................................8
3.4...........................................................................................................................................8
Part B.............................................................................................................................................10
Part C.............................................................................................................................................11
References......................................................................................................................................13

Question 1
1.1
Assets 148960
Liquid Asset 2080
Cash 80
Current Account 0
Instant access saving account 100
Other liquid assets 0
Other Assets 146880
Home 146880
Liabilities (Total) 115300
Short-term liabilities 4300
Overdraft 1800
Credit Card 2500
Other short-term liabilities 0
Other Liabilities 111000
Personal Loans 1000
Mortgage 110000
1.2
Deposit required: What is the minimum amount one must put down on your home? The amount
of money one have in the bank will determine which mortgage items one can get and what rates
one can get. The most favorable rates are typically held for those that have the biggest deposits.
If they're first-time buyer, most mortgage items would require a deposit of at-least 5-10 percent.
There are, though, mortgages available that will provide lenders with 100% of property's value.
If one remortgaging, they’ll typically have a lot of choices because their property's value has
obviously increased (Olafsson and Pagel, 2018).
Interest rate: Another major aspect to be regarded here is interest rate. We know we said you
shouldn't look at the interest rate alone, but it's still one of the most important factors to
remember. After all, this will decide how much one pay per month as well as how much interests
one pay over the duration of mortgage. Following financial crisis, interest levels are at historic
lows for almost a decade. As a consequence, the market is flooded with competitive alternatives.
Obviously, one wants the lowest interest rate feasible; even seemingly insignificant difference

could have a major effect over the duration of mortgage. Although don't let this be your only
consideration; otherwise, one could end up with mortgage that isn't right for them.
Length of mortgage: Most lenders allow to choose the duration of mortgage. It will help one
to gain more control over their finances and match their repayments with budget. When
one is first getting on property ladder, the typical mortgage period is 25 years. However, many
borrowers opt to expand this in order to render payments more manageable. One may be able to
get 40-year mortgage depending on age and conditions. If one prefers a mortgage with shorter
term, their monthly payments would be greater, but one will pay fewer interest in the long run.
It's important to strike a balance between their short- and long-term plans and objectives. If
one remortgaging, the he/she also have option of lengthening or shortening term to reflect any
changes in situation (Cao, Gong and Zeng, 2020).
1.3
Ratios:
Particulars Sep-20 Workings Sep-18
Net Worth/Wealth 33660 (148960-115300) 27580
Current Asset Ratio 0.48 (2080/4300) 1.39
Leverage Ratio 77.40 (115300/148960
*100)
81.12
Comparison shows that Net worth of this couple has been increased from 27580 to
33660. While current assets ratio of Donna and Dan has been declined from 1.38 to 0.48 which
shows that their short term liquidity position has been declined over the period. While leverage
ratio of this Donna and Dan has also been declined from 81.12 to 77.40 which indicates that
proration of overall debts has been increased over the period. The overall comparison shows that
their home improvement idea has not affected their net worth but their long term as well as short
term liquidity position has been affected significantly.