We were having a discussion in the office recently about mortgages. They seem like such an “adult” thing, and for many, getting that first property and the mortgage to go with it is seen as a major life goal. And the average age of obtaining a mortgage is now much higher, with only one in five under 25-year-olds in the UK having a mortgage at the current time and the average age of a first-time-buyer being 35, so is it realistic to think most of us don’t start really learning properly about mortgage until our mid-twenties? We were trying to think back to when we first heard about the concept of a mortgage, what was the context behind it, and what did we think it was? And what do children these days think of mortgages, now that Financial Education has become part of the curriculum?
“I remember playing monopoly as a child and if you ran out of money you had to turn one of your property cards over and re-mortgage it to the bank. The back of the card was red, so it seemed quite serious! And then if you couldn’t keep up the repayment you had to give your card back to the bank. It was quite a subtle life-lesson in what happens if you run out of money.”
“A mortgage is a big bill that you have to pay every month to live in your house”
“I didn’t really know what a mortgage was until I was 19 and started working in a mortgage company as a filing assistant. I slowly learned the lingo and got to know that there were different interest rates based on different conditions such as loan to value and property type. But at that age a mortgage still seemed like something I wouldn’t be involved with for quite some time as I was more interested in finding the best properties to rent that were in the centre of the city with the best views, and I liked the fact that I could move every 6 – 12 months!”
“The mortgage comes from the bank and you have to give it back and if you don’t they come and take your TV”
“I’ve only really started thinking about mortgages since I’ve settled down with my partner and we are thinking about where we can live together. It makes more sense to own a home instead of renting. There are a lot of calculators online that act as a guide to how much a mortgage might cost each month and that gives us an idea of how much to try to save. But until we actually need to start shopping around, I still fee I have a lot to learn about the different rates and fixed products etc.”
How can we help the younger generation become more aware of how mortgages work?
It’s easy to leave mortgage research to the minute it’s needed – when you’re ready to buy a house and need to get your loan approved asap. But this can lead to disappointment if you’re not aware of lending criteria. So, if owning a home and having financial stability is one of your child’s longer-term goals, it’s good for young adults to start learning and thinking about mortgages as soon as they can.
They are a few different board games that teach us about managing finances, the old classics such as Monopoly and the Game of Life. You can also get your children interested in budgeting, giving them some idea of how you work your household budget each month. If you’re planning to switch your mortgage for a better rate, or make overpayments, share this information with your teen. They may be fascinated to see the difference it makes to the life of the loan when you make a £150 extra payment each month – it’s certainly something that interested us! And finally, if you’re taking mortgage advice in person, take your children with you, it might be “boring” but it helps them see that actually mortgage advice meetings are approachable and non-committal.
If you have seen a property advertised with Oakley that you would like to buy, we’re happy to point you in the direction of our recommended Mortgage Advisors who can help you work out your affordability and the best products for your budget.
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