Buying a home is likely the biggest purchase you’ll ever make.
The problem is that most of us don’t have the funds to buy outright, or the timeline to wait and save. Banks offer mortgage loans to prospective home buyers in an effort to work with your needs. But is having mortgage payments a bad thing?
Below, we’ll discuss the advantages and disadvantages of home mortgages to help you make the best financial decision for your future.
How Does a Home Mortgage Work?
A home mortgage is a cost-effective loan that assists you with the purchase of your home. However, any time you receive a loan, you must consider the interest.
If you have a great credit score and reliable source of income, your mortgage interest will generally be lower than other credit forms. The main reason for this is that should you be unable to satisfy your monthly payments, the bank can still recoup some of the money by leveraging the value of the home.
Essentially, your home belongs to the bank until you’ve paid off your mortgage.
Depending on the type of mortgage you have as well as the term length, you’ll make continual payments, along with interest, until the loan is paid off.
Advantages of Home Mortgages
The most obvious advantage of taking out a mortgage is that it makes homes affordable for the average adult. Borrowing can often receive a bad reputation. However, this generally only happens when buyers are looking to spend or take loans out that are beyond their means.
Many homeowners very successfully negotiate mortgage terms that allow them to pay off their home with accurate expectations. Given the significance of the purchase, you should be fully involved and ask every possible question to set yourself up for success.
You can help yourself further by selecting a mortgage type that is predictable, such as a fixed rate mortgage. Your monthly payments may be slightly higher, but your interest rate will remain a predictable percentage that you can play your finances around.
Disadvantages of Home Mortgages
The major disadvantage of taking out a mortgage is the interest. Since your home is the biggest expense you’ll ever accrue, the amount spent in interest will be proportionally larger as well. You’ll end up spending far more than the actual value of the home. Depending on the life of the loan and your interest rate, you could end up paying more than double.
The other drawback of taking out a real estate loan is the risk involved. Even the best-intentioned buyers can’t predict the future. If you or your spouse is unexpectedly laid off, you’ll find yourself overwhelmed with stress trying to meet your payments. Failure to do so can result in repossession of the home.
Banks will often work with you to help in these types of situations, as both parties usually lose in the event of defaulting on your loan. However, you can very quickly find yourself spiraling by being hit with penalty fees and a large deduction to your credit score if you’re not careful.
Morris Realty Co – Social Circle, Georgia
For information about purchasing and selling homes, mortgages, home equity, and more, count on Morris Realty Co.
Our team is passionate about serving our clients in helping them find their ideal home. We work harder than the competition to find you the right house that also fits within your financial means. Our service comes with sound advice, leaving you assured that buying with us is the right call.
You can start your home buying journey now by browsing our featured listings! For other questions or concerns, or to set up an appointment, give us a call today at 678-210-5028!