A mortgage is a loan that we take from a lender to buy a property. The lender pays the seller of the property the total value.
The borrower enters into an agreement to pay the interest in line with the mortgage loan interest rate to the lender over an agreed period, known as the mortgage term. Each installment consists of the principal and the interest amount.
In a mortgage, the property serves as collateral for the loan. If you default, the lender can possess your property. The process of claiming a defaulter’s property from a borrower is called foreclosure.
Why opt for A Mortgage?
You may have enough spare cash to buy a property. It is like buying home appliances or a car, but the value is infinitely higher. Now, why would you go in for a mortgage if you have enough cash to buy a property?
Advantages of Having a Mortgage
Getting a mortgage loan has several advantages, even if you have enough money in the bank to buy a property outright. Here are some benefits of having a mortgage loan:
1. Access to Money That You Don’t Have
With the prohibitive cost of real estate today, you would have to be a millionaire to buy property cash-down. A mortgage gives you the money to buy a property of your choice with money that many people cannot earn in one go.
2. Instant Benefit from a Property
With a mortgage, you can buy a home instantly. If the property is ready to be occupied, you can move into a home in a matter of days of your mortgage funds being released. You can start enjoying the benefits of your new home immediately.
3. Divert Your Cash for Other Purposes
If you put all your money into a house, mainly if you live in it, the value gets locked up in that property. But with a mortgage, you are putting a fraction of your available cash into the investment, maybe only your monthly EMIs and the down payment.
You can put the rest of your spare cash to better use by investing it. While you slowly pay for your home over the years, the money you invest will gradually grow, and you will get a substantial amount on maturity.
4. Enough Cash for Emergencies
There is a saying, “Don’t put your eggs in one basket.” If you spend a considerable amount of cash buying a property, you will essentially be doing just that. You might have insufficient money to cover an unforeseen financial crisis.
What if your home is unexpectedly and tragically destroyed? Even with insurance in place, it will take time for your claim to be processed. In the meantime, where will you live? What will you do for money?
Having a mortgage takes a lot of financial pressure off you. When owning a home can be done by paying easy, monthly installments, why not go for it?
5. Tax Relief
If you have a mortgage, you can save on income tax. The interest amount that you pay every month is tax-deductible. Your income tax decreases considerably by showing the monthly EMIs of your mortgage loan.
6. Having a Mortgage is Like Paying Rent
Here’s a realistic example that will make you sit up and think. When you first start paying monthly EMI on a mortgage, it seems like a relatively large amount. You will probably pay several times the current going rate of rent in your city.
Fast-forward to about ten years later. Inflation will have shot up rents so drastically that they will equal or more than the EMI you started paying ten years ago.
If you’d continued to live in rented homes, you still wouldn’t have a home of your own. But by sticking it out over the years, you end up with your property. Your EMI remains the same in line with your mortgage loan interest rate, but historically, rents will continue to rise.
Conclusion
Taking a mortgage has multiple benefits. Get a mortgage on a home for you and your family today, move into your new home with cash to spare to invest and spend on you and your loved ones.
