Owning a home is everyone’s dream, in fact it is considered an American dream. While most people have had the opportunity to grab that dream, others, especially those who are the younger generations may find it difficult to obtain that dream – only if they don’t know how to go about it.
A Mortgage could be overwhelming to some people but this article will point out as to why getting a mortgage could be useful and beneficial. First, let us go to the basics:
What is a mortgage?
According to Wikipedia, it is “A mortgage loan, also referred to as a mortgage, is used by purchasers of real property to raise money to buy the property to be purchased or by existing property owners to raise funds for any purpose.” The property itself is the collateral which makes it a secured loan. There are 2 types of mortgage loans for especially for home buyers – which are defined as such; fixed- interest rate and adjustable rate.
- Fixed interest rate – by definition, it simply means that the lender pays the same interest rate for the life of the loan. No mess, no fuss.
- Adjustable rate - Unlike the fixed interest rate, the interest with this type of mortgage varies through time.
While interest may seem to be such as something that is a bad idea, why not consider the options as to the benefits of a home mortgage.
Ownership – Once the down payment has been made, which is usually a fraction of the cost of the entire property, compared to renting, getting a home mortgage is something similar to paying a monthly rent which may be a little bit higher, however it is getting paid towards the home thus thinking about it you are investing your hard earned money to a property that will be wholly yours in the future. Ownership also means that you have the freedom to paint the house with the color of choice, you also have the freedom to decorate it anyway you want it or renovate the house anytime you want. Unless of course, if the property you have bought is under some kind of HOA rules and regulations, then that freedom may be limited to a few or under a fortunate event, none.
Builds credit rating – as long as the mortgage is in good credit standing, or current and up-to-date, this will enable the lender to improve and build their credit rating over time thus giving the capability to be offered with a car loan or credit card with the best interest rate. A good credit score will also give consideration to creditors to extend additional credit.
Access to cash - a mortgage can give you access to funds especially when you need the money, or otherwise called as home equity loan wherein the equity of the home is being used as the collateral in order to have access to cash to finance major expenses such as college education, medical bills or major home repairs.
Tax benefits - compared to renting, people who have mortgage have income tax deductions. This is because for every $1 you spend on paying on interest there is at least 35 cents tax break. Which is when you itemize your deductions; you will get reduced taxable income compared to those who do not have mortgage payments.
Security – there is a certain sense of security of paying off your mortgage, however in cases of disasters such as earthquake and you are still paying your mortgage, the insurance will help to rebuild your home unless if you have insurance laid out once you have paid off your home.
Investment opportunity - this is consequently something that is related to informed decision. If you are paying for a mortgage and the opportunity for a business comes, then you will be able to have access to funds for investment compared to when you have used up all your money in the bank to pay off the mortgage.
Of course, there are certain disadvantages to having a mortgage such as over time the value of the property could depreciate and you could be paying for more than the property’s real value. However, a well-researched and gathered informed decision can be able to provide you with the knowledge about mortgage and home ownership. Best to speak to a professional such as a real estate agent to provide you with valuable information to help you achieve that American dream.
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