Housing · Lesson Plan
Buying a House
A house is the most expensive thing most people ever buy, and almost nobody pays cash — so buying a home really means borrowing for thirty years. This lesson works one house all the way through: the down payment and closing costs that get you the keys, what the loan costs once interest is added, and the property tax, insurance, HOA fees and maintenance that never appear on the listing. Students finish by comparing the true monthly cost of owning against renting the same house.
For Teachers
Lesson at a glance
- Topic
- Housing
- Grade Level
- Grades 7–12
- Resource Type
- Lesson + Worksheet
- Estimated Time
- 45–60 minutes
- Format
- Worked example + worksheet
- Materials
- Worksheet, calculators, whiteboard or projector
What Students Learn
Learning objectives
- Discuss the reasons people choose to buy a home rather than rent one
- Calculate a down payment and closing costs, and the total cash needed at closing
- Explain the elements of a mortgage: principal, interest, term, escrow, and the amortization schedule
- Compare the different types of lenders and home loans available to a buyer
- Calculate the total interest paid over the life of a loan and compare it to the amount borrowed
- Recognize the other costs of ownership — property tax, insurance, HOA fees, and maintenance
- Evaluate the costs and benefits of homeownership against renting for a specific situation
Materials
What you’ll need
- Printed copies of the worksheet (one per student)
- Calculators
- Whiteboard or projector for the worked example
- Pens or pencils
Key Terms
Vocabulary
- Mortgage
- A long-term loan used to buy a home, secured by the home itself.
- Down payment
- The share of the purchase price the buyer pays up front, in cash, rather than borrowing.
- Closing costs
- Fees due when the sale completes — typically a few percent of the price — paid on top of the down payment.
- Principal
- The amount of money actually borrowed, not counting interest.
- Amortization
- The schedule showing how each payment splits between interest and principal; early payments are almost entirely interest.
- Escrow account
- An account the lender uses to collect property tax and insurance monthly and pay them when they come due.
- Property tax
- An annual tax charged by local government based on the value of the home.
- HOA fee
- A recurring fee charged by a homeowners association for the upkeep of shared areas.
- Equity
- The share of the home the owner actually owns — its value minus what is still owed.
For Teachers
Lesson plan
Estimated time: one 45–60 minute class period.
Lesson sequence
- Warm-up (5 min). Ask: if a house costs $240,000 and a good saver puts away $300 a month, how long to save the whole price? (Over 66 years.) Use that to establish why buying means borrowing.
- Getting the keys (10 min). Work Part 1. Students calculate the down payment and closing costs and discover that the cash needed on day one is far more than the down payment alone.
- What the loan really costs (15 min). Work Part 2. Give the monthly payment rather than deriving it — the lesson is in the total. Students multiply out 360 payments and subtract the principal, and find the interest exceeds the amount borrowed. Pause here; this is the point of the lesson.
- The costs nobody mentions (10 min). Work Part 3. Introduce the escrow account, then add HOA fees and a maintenance budget. Compare the final figure to the mortgage payment students started with.
- Was it worth it? (10 min). Part 4 compares owning to renting the same house, and shows how little of the first payment builds equity. Then ask for reasons to buy anyway — the point is a clear-eyed decision, not a verdict.
Assessment
Assess the completed worksheet, with particular attention to questions 7 and 13, and participation in the closing discussion.
Extension
Rerun the loan at 15 years instead of 30. The monthly payment rises sharply, but the total interest falls by more than half — a concrete demonstration that term, not price, drives what a house costs.
This lesson is for educational purposes only. All figures are simplified teaching examples, not current market rates, and are not financial advice.
Discussion
Discussion questions
- Why does the cash needed on closing day come to so much more than the down payment?
- On this loan the interest is more than the amount borrowed. What causes that — the price of the house, or something else?
- What is an escrow account for, and why would a lender want to collect property tax and insurance itself?
- Only a small part of an early mortgage payment reduces the loan. What does that mean for someone who plans to move in two or three years?
- Knowing everything on this worksheet, give two reasons someone might still choose to buy rather than rent.
Printable Worksheet
Buying a House — Worksheet & Answer Key
Students work one $240,000 home purchase from down payment through 30 years of interest to the true monthly cost of ownership, then compare it to renting. Answer key included.
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