Pros and cons of mortgages

Most people do not make enough income to pay for a home in cash. Even when you have the money to pay for a loan up-front you should consider the benefits of using mortgage to pay for your home. A home loan may benefit you more than up-front cash depending on your financial situation, commitments and future plans.

Mortgage allows you to obtain an asset that may rise in value even when the loan is completely paid off. You can use the title deed of your home as collateral to obtain bigger loans and other mortgages. When you pay your mortgage payments, you increase your credit and chances to get more homes through mortgage

You can take advantage of the tax benefits of a mortgage. Depending on your region, the government limits mortgage interest and reduce rental income tax for individuals with mortgages. The restrictions remove deductions of financial costs before the tax is calculated. Home mortgage can serve you as an ideal tax shelter especially if you have multiple loans to repay.

Mortgage is the easiest way to make home ownership affordable. With a good salary, credit record and financial benefits lenders are willing to provide to you a loan to purchase a home. The 25 to 30 years repayment terms makes the monthly repayments low so you don’t have to commit most of your salary in repaying the loan but in the end you clean out the debt

Most lending companies offer mortgage on repayment basis. This means you pay part of the loan and some of the interest monthly. By the end of your payment period, you will have cleared both the loan and its interest. Some companies offer an interest only payment. Here, your monthly pay includes the interest only. You have to come up with a plan to pay repay the mortgage in full after you are done paying the interest.

One unavoidable disadvantage is the interest of the mortgage. You will pay back to the lenders more money than you borrowed. You will carry a large debt over a long period of time. You are committed to repaying the money monthly, which may dent your income and savings and you may be unable to start on new projects.

The mortgage is secured on your property which can be a great risk factor. If you don’t keep up with the monthly mortgage payments, you could lose your home. Mortgage means that the lenders pay for your home and you pay them back slowly with interest. When you are unable to pay them, they resell the property to get their money worth back.

Although the money you pay monthly is considerable, the total amount per year is big. At the end of it all, be prepared to pay double the amount you got as mortgage. Set up fees and closing fees  are hefty and may dent your pockets.

When taking a mortgage, go for amount you can afford to pay in the shortest term possible. When you take the right deal, you will be free from paying the loan sooner and avoid paying extra thousands of pounds for unnecessary reasons. Follow the same rules when you remortgage and you will have a smooth financial lifestyle