The Benefits of a Mortgage

Are you wondering if a mortgage has benefits? Of course, it does. We will point out what are the main benefits of having a mortgage. If you already decided to apply for a mortgage, here are the types of mortgage loans for home buyers.

A turning point in a person’s life is buying a home. It is always an important moment and an important decision. Doesn’t matter whether you are tired of paying rent, just moved out of your parents’ house or you simply saved enough money.

But, when you face this moment, you will probably realize that basically, you have only two options of paying for your new home. Those are – paying for it with cash or getting a mortgage. Each of these has its own pros and cons. What you choose depends on what suits you better.

Pros and cons of paying cash for a house

If you opt for paying with cash, be aware that there are both pros and cons. Of course, the biggest advantage is that you don’t have to pay interest or any additional costs like insurance costs, legal costs, closing costs, etc. Also, you will fully become an owner right away, while with a mortgage there is always a risk you might not be able to pay mortgage repayment if something unexpected happens, for example, if you lose a job, get sick, etc.

On the other hand, if you give all your savings at once, you will lose your liquidity and have less money to invest. Also, you will not get the tax deduction as you would if you had a mortgage.

The downsides of a mortgage

The major disadvantage of having a mortgage is paying a lot more money than you borrowed. As we mentioned, there are some additional costs like application costs, legal costs, insurance, etc. But the main thing that makes difference is – the interest.

You will pay off the amount you borrowed increased by interest rates. And you will probably do that for a long time. So, if you opt for a mortgage instead of a cash payment, you should be aware that you have to have continuity in earning money. That way, you can pay the mortgage every month or you might lose your house.

Also, keep in mind that if you choose to get out of your mortgage earlier, you will probably pay the penalty fees.


The benefits of a mortgage

If you haven’t saved enough money to buy the house for cash, then a mortgage is a perfect choice for you. But, in some cases, a mortgage is a good choice even if you have enough money in your hands. Here are some of the main advantages of having a mortgage.

1. Buy a home without the cash

Many people don’t have enough savings to buy a house or they don’t have enough to buy a house that is big enough for their family. The good news is that you don’t have to have cash in your hands to buy a house.

Actually, many people are not even in the position to save that much money because they usually already pay the rent. When you apply for the mortgage, you will use the money you pay for the rent for the mortgage payments.

It maybe doesn’t change a lot when it comes to your monthly expenses, but the end result is very much different. When you opt for paying rent, you will get nothing, but when you pay for the mortgage, after a while you will become a house owner.

2. You have more options

Even if you manage to save enough cash to buy a house, you would probably have to be satisfied with a smaller house or a house in a different neighborhood. When you apply for a mortgage, you can have more money to work with. That means you can buy a better house, a bigger house, a house in a better neighborhood, or any other house that is most suitable for you and your family.

3. Keep the cash

Many people feel more comfortable when they have cash reserves. These are used when they have some unexpected expenses or financial problems, or simply for further investments. When you buy a house for cash, usually you give everything you own, leaving you with no cash reserves.

4. Tax deductions

Your monthly mortgage payments include the amounts of interest on the mortgage. Every year when you file your taxes, you receive the tax deductions on the interest, but only if you itemize. That’s another useful advantage of a mortgage when compared to paying the cash for a house.