The median age of first-time homebuyers has hit a record age of 33. With the finances required to do it, it seems that buying your first home is becoming a more daunting task, and it’s taking people longer to get there.
There are two main choices when buying a house. You can pay in cold, hard cash, or you can take out a mortgage.
Although the idea of such a large debt can be as scary as the purchase, fear not. Mortgages have a lot of advantages.
Even if you are one of the lucky few who have the choice of paying it all upfront or taking out a mortgage, you might want to consider a mortgage, like many do.
So why exactly would you commit to many, many payments rather than get it all over with?
1. You Still Have the Choice to Pay it off
Just because you take out a mortgage doesn’t mean you’re committing for life.
If you do come into money that gives you the ability to pay it off, or you start to wish you’d done it in the first place, you can pay the debt off faster.
If the unstable housing markets are starting to worry you, or you just want to free up the monthly bill, you still have the option to.
The benefits of paying off a mortgage can be just as helpful to your life later, as taking one out was at the time. Don’t panic if you have a change of heart — finding out how to pay off a mortgage is usually painless.
But you can’t go back to a mortgage after choosing to buy outright.
2. Second Mortgages Have Low Interest Rates
But maybe you’ve been through this process before. Maybe you’ve already bought a home.
You can take out a second mortgage on that property, letting you borrow against your home equity. This can have huge advantages.
It’s cheaper than remortgaging, and it gives you the money to pay high-cost fees such as medical bills or college bills.
A second mortgage can be intimidating, but it’s better than some other options if you need to free up money. Especially as they usually have very low interest rates.
3. There are Tax Benefits
What else might be intimidating to homeowners is the complications that come with filing your taxes after taking out a mortgage. But in the end, it’s beneficial to you.
After all, the IRS wants to encourage you to buy a home.
Mortgage interest is completely deductible. It has a limit, but the average person doesn’t need to worry about that limit.
Sadly, $1,000,000 is not a cap most of us come close to.
Certain people are also eligible to deduct private mortgage insurance.
There are tax deductions that will ease how much a mortgage costs, and are not open to you if you pay for your home upfront.
4. It’s a Great Way to Force Yourself to Save
Mortgages force you to save money. They’re going to be beneficial in later life.
You’re probably going to see the value of the house rise so when it’s eventually paid off, you’ll have made a profit.
You’d see the same thing if you bought outright, but this is a way to make a profit without having to drop the kind of money that very few people have lying around in their banks.
Not only does it build equity and force you to learn some serious budgeting skills, but if you pay more each month, your interest rate will go down.
Mortgages are more flexible than you think. Especially after you’ve agreed to one.
5. Your Credit Score will Rise
For most people, they have no bigger debt than their mortgage.
After all, a house can be anywhere between tens of thousands of dollars and millions. It’s often a once-in-a-lifetime purchase.
Therefore, there’s going to be nothing bigger impacting your credit scores. Credit scores are extremely important in life and if you can keep on top of your mortgage, it’ll be impacted hugely and positively.
If you buy a home outright, you don’t get the advantage of seeing your score shoot up.
If you could use keeping your score in a great place for future credit and investments, a mortgage might be the sensible idea.
6. Getting a Mortgage Doesn’t Always Take a Shiny Clean Financial Background
But wait — don’t you need a perfect credit score to get a mortgage?
No. People often overestimate how hard it is to get a mortgage, and it puts them off trying, keeps them renting.
Sure, if you get a mortgage from a bank, they might care about your credit score. But if you get one from a private lender, they’re less likely to be uptight about that sort of thing.
Private lenders will mean that the process can include risks, and a great credit score is not the most essential part of the process.
This is how you build one. You’re not required to have that angelic financial history you might think.
7. You Have Control over the Down Payment
Just because you take out a mortgage for a house that’s $500,000, doesn’t mean that whole half a million has to be split into monthly payments.
Although you’re usually required to make a bit of a down payment, you can choose if you want to pay more. If you want to reduce the time of your mortgage or your monthly payments, a larger down payment is ideal.
As well as this, you’ll reduce your interest payments and it makes it easier to borrow in the future.
Of course, this isn’t to say you have to make a large down payment. Just that there are advantages to doing so.
Are You Ready?
Ultimately, you have control over way more than you think when it comes to taking out a mortgage. It also takes way less than you think.
You don’t need a large cash sum to buy a house. Even those fortunate folks who have that might opt for a mortgage because of its many advantages.
If you’re excited to learn more about mortgages (and you should be!), please browse our site and contact us to get a quote.