Advantages and Disadvantages of Mortgages

You’re thinking about buying your first home. You have been renting for some time, and you have saved some money toward a down payment. Interest rates are attractive, and you may be seeing many reasonably priced homes for sale. If you have never purchased a home, there are advantages and disadvantages of mortgages.

One of the biggest benefits of having a mortgage is that you build equity in your home. It is easy to write a check each month for rent, but you could be using that same money to help pay for your own home. If you decide to sell your residence, you will receive some or all of that money back, depending upon what you owe in your mortgage at the time of the sale. Paying your mortgage on a timely basis also improves your credit rating, making you more eligible for other loans. You can achieve some tax advantages. You can deduct what you pay in mortgage interest and property taxes each year on your income tax returns. While rents may increase every year, mortgage payments will not, providing that you opt for a fixed-rate program. Finally, the pride and security of home ownership is a benefit with a value you cannot overestimate.

Mortgages also carry some risks. If you work in a position that requires you to relocate every few years, a volatile real estate environment may make it difficult for you to sell your home. Until your home is sold, you are required to pay mortgage as well as property taxes. If your credit score has a few blemishes, you may be required to pay a higher interest rate or supply more money for a down payment. You should also consider your overall stability: if a financial hardship makes it difficult for you to pay your mortgage every month, you may face foreclosure. As you investigate the advantages and disadvantages of mortgages, look into every aspect of your life to make sure this important step is right for you.