Everyone dreams of buying their own house. While some have enough savings for this kind of investment, a majority of would-be homeowners have to take out a home loan to be able to afford it. Many first time homeowners are also afraid to take out a mortgage simply because they don’t know what to expect. Moreover, a lot of folks are fearful of the long-term commitment that home loans require. However, the truth is that getting a loan for your house investment can work out to be a sound and wise financial decision.
Home loan / reverse mortgage or transforming assets into cash concept : House paper model , US dollar hessian bags on a wood balance scale, depicts a homeowner or a borrower turns properties into cash
Here are some reasons why getting a home loan or signing up for a mortgage isn’t so bad after all:
- Good Investment
If you’re going to be in debt for something, it should always be for a worthwhile investment. Don’t just put yourself in debt over things that are fleeting and temporary, such as clothing items. Because the home loan is for your very first house, this is one of the best investments that you can make for yourself and your family. So, it’s a loan that will not steal your hard-earned money from you. When your loan contract is finished, you’re on the winning side of the equation.
Remember that houses, or any real property, always do appreciate. So, as you go on paying your mortgage, the value of your home is also increasing. This is unlike cars, which are investments that easily depreciate.
Because it’s your first home, there’s also a high probability that, at some point in your life, you’re going to purchase a new one. So, what are you going to do with this first house? Even the existing mortgage payments on the property still exist, you can have this rented out to tenants. Henceforth, you’ve got income coming in to help you pay for the remainder of the mortgage, plus the possibility of gaining extra profit every month. When the loan is fully paid, should you decide to sell the property, it has already appreciated, thus you gain back all that you spent on the loan, interest included, plus some profit.
- Gives Your Budget So Much More Liquidity
Yes, you may have enough cash reserves right now to be able to pay for your first home in cash. But, when you resort to this, these resources are naturally going to get drained, thus your liquidity may suffer. This means that should any contingency arise after buying your first home, your capability to make your money flow in and out effortlessly without burning a hole is hampered.
For example, you may need to carry out repairs as an inherent part of house ownership. However, house repairs can be costly. Because you’ve spent a bulk of your savings for the house itself, now it may be hard to have any excess cash to shoulder the expenses of additional home projects.
Taking out a home loan would instead be a wiser choice, most especially when you’re starting a family, as expenses increase each passing day. You’ll need more liquid cash on hand to spend for emergency situations. Fortunately, with a mortgage, you’re giving yourself more flexibility with regards to your money.
- Low Interest Rates
It may come as a surprising fact to you, but there are many home loan options today that actually come with very low interest rates. As mentioned earlier in this article, because you’re taking out the loan for a worthwhile investment–in this case, your very first house–in the long run, the appreciated value of your property will even be more than enough to compensate for whatever interest you’re charged with the loan. Because interest rates are also low, such an amount isn’t going to be that significant.
There are even some home loans with interest rates that you can expect to fluctuate in the future. So, over time, you may notice a significant drop in the amount of the interest that you pay for your mortgage. For this reason, buying a home with a home loan is a sound investment for your future.
- Entitlement To Tax Deductions
This section on the tax deductions may vary from one state to another, and even more so if you’re reading this from another country. But, the general rule is that you may have entitlement to tax deductions because of the expenses of homeownership. The law states that when you buy a home, you may be eligible to deduct some of the costs related to owning that home from the taxes that you pay to the government. These expenses include mortgage interest. When you account for this annually, this can amount to thousands of dollars worth of savings.
- Gives You A Sense Of Accomplishment
Because this is your first house, it would naturally result in you gaining a sense of accomplishment. But, perhaps, because you’re still young and have just started working, then it may also be the case that you don’t have enough yet in terms of savings to pay the property in cash.
Take out a home loan. Even when you’re still young and don’t have much money in your bank account, you can still end up being a homeowner.
The great thing about getting a home loan while young is that when your paycheck comes in, you tend to become more responsible with your finances. Rather than spending all your hard-earned money on rent and other expenses that don’t prove to be worth it, you’re paying a mortgage instead on a property, which you own. That’s something that not everyone gets to do. In the long run, this property may even be the very first opportunity for you to earn a passive income alongside your job, should you already have enough savings to buy a new home.
Conclusion
Wherever you go, you’re inevitably going to hear that advice that having a loan or credit is bad. Of course, no one wants to be in debt. But, the truth is that there are cases when signing up for a loan may be a good and beneficial thing, especially when it involves worthwhile investments. An excellent example of this is for financing your first house. For as long as you’re smart about your investment and you’re responsible for your loan, it’s one of the best financial decisions that you can ever make. You’ll get to enjoy the benefits enumerated above and even more.