Owning a home is a valuable and significant investment. Unfortunately, this also means homes don't come cheap, and not everyone can afford a home purchase with cash. This explains the growing popularity of mortgage-funded homes. In fact, buying a home through a mortgage loan may be a good idea, even if you can afford to purchase with cash. Continue reading to learn the benefits of mortgage loans.
Maintain Your Cash Reserves
Emergencies do occur from sudden illnesses, divorce, or loss of a job. During such times, you'll benefit from having money in the bank instead of in your real estate.
Besides, if a disaster, like an earthquake, strikes your home and makes it uninhabitable, it may take a while before your home insurance covers the rebuilding costs. With cash in the bank, you can manage your relocation and seek reimbursement from your insurer later.
Makes Home Ownership Affordable
With mortgage loans, you can spread your monthly payments over many years to make your home purchase more affordable and manageable. Most people tend to go with a 25-year term for their first mortgage. However, with the retirement age going up, 30-year mortgage plans are also increasingly common. Typically, the longer your mortgage loan, the lower your monthly payments.
On the flip side, you'll be stuck with debt for longer if you have a long mortgage loan. If your monthly budget allows, you could go with a shorter-term loan, so you're mortgage-free sooner. Therefore, take your time to decide the plan that's most suitable for you.
Mortgage Loans Get Easier With Time
Having a mortgage loan can be fun with time, especially if you're carrying a fixed-rate loan. In the beginning, you may feel burdened a bit by the monthly payments because your income isn't that high. But as you grow in your career or as your business expands, your income grows, and the mortgage payment becomes insignificant.
By the time you're in the latter stages of your mortgage loan, you may not even feel like you're still servicing the loan. You can even pay off the loan and be done with it.
Mortgage Loans Are Cost-Effective
The interest rates for mortgage loans are generally lower compared to other types of loans because the property is used as security. If the unexpected happens and you cannot repay your loan, the bank or mortgage lender will sell your home to pay back the mortgage.
Besides, there are various types of mortgages, including fixed-rate mortgages, tracker mortgages, adjustable-rate mortgages, and jumbo mortgages. You can pick the most suitable plan, depending on your financial capabilities. You may also be eligible for discounts and offset mortgages, especially if you're a first-time buyer.Share