8.4 living: rent or buy

• Economie
• Middelbare school
• vwo
• Leerjaar 3

Economics

Program

1 - Recap previous class

2 - Homework

3 - New explanation

4 - Assignments

Statement: people with a higher risk should pay more premium compared to people with a low risk.

Explain the different between good and bad risks.

Good and bad risks

Good risks = people that claim proportionally less damage

Bad risks = people that claim more damages

What is meant with premium differentiation?

Good and bad risks

In some cases there is premium differentiation

Premium depends on the risk that is run by a specific group of insured persons

The people with lower risks pay a lower premium than people with high risks

What is meant with moral hazards?

Moral hazard

What happens when people are insured?

People might become less careful.. i'm insured anyway right?

This is called moral hazard 

To counter this - introduction of an excess. E.g. that with damages you need to pay the first EUR 50 yourself before you receive a compensations

Homework

Check assignment 8. 10 - 8.12

Program

1 - Recap previous class

2 - Homework

3 - New explanation

4 - Assignments

New explanation

8.4 Living: rent or buy?

Renting or buying a house is a process of thinking about the pros and cons

There are as well some uncertainties (will the value of my house stay the same?)

8.4 Living: rent or buy?

A mortgage loan --> a long-term loan with registered property as security

Registered property = immovable goods such as buildings and land

Securtiy = a cover to reduce the risk that the loan provider does not get the money back

8.4 Living: rent or buy?

When buying a house... 

 You build up capital (repayment of your loan or increase in value of house)

+ You can adjust the house according to your wishes

When renting... 

When renting a house you lose all the money for rent.. but you have more flexibility 

would you rather buy or rent a house.. explain why

8.4 Living: rent or buy?

Compare as well the costs of renting vs the cost of buying a house

Housing allowance = contribution to rent costs for tenants with lower incomes which is provided by the government

Net housing costs:

- interest on the mortgage loan 

- maintenance costs of the house

- premiums for house insurance

- taxed imposed on the possession of the house

8.5 inherit

Inheritance = concerns all the assets an liabilities left by a deceased person

When there is a will it is defined who gets what

If there is no will then the law of succession determines who will inherit what..

The legal partnerand the blood relatives are the only heirs (people who get something)  

Assignments

Complete assignments 8.13 till 8.18