You have to be honest with yourself when it comes to your finances. For example, when buying a home with a mortgage, it’s critical to consider both the pros and cons.
By weighing the advantages and disadvantages, you’ll find it easier to determine if a mortgage is a viable addition to your budget.
Let’s start by taking a look at the benefits of a mortgage:
- Tax advantages: Potential tax advantages include deductions for real estate taxes, mortgage interest, and any points purchased at the time of securing a loan. By lowering your tax liability, you have access to more money throughout the year.
- Investment potential: Real estate is one of the best investments you can make. Historically, home prices tend to increase in value over time. So, the home that you buy today could be worth a lot more money when you decide to sell it, such as when your adult children move out or upon reaching retirement age.
- Stability: When you rent, you’re always at the mercy of the person who owns the property. If they decide to sell, you could find yourself without a place to live. Conversely, when you pay for your home via a mortgage, you’re in full control.
Now, let’s take a look at some of the potential drawbacks of a mortgage:
- Foreclosure: You expect to make every mortgage payment in full and on time, but your financial circumstances could change without notice. If you’re unable to pay your mortgage, foreclosure becomes a very real possibility.
- Potential payment changes: With adjustable-rate (ARM) mortgages, your monthly payment can go higher or lower depending on the economy. If your payment drops, you’ll enjoy the additional money in your budget. But if it increases, it could result in a hardship.
- It’s more difficult to move on: When renting, you can move on at the end of your lease without having to explain yourself. This gives you more flexibility regarding your housing. But with a mortgage, it’s more difficult to pick up and move. Most people find that they have to sell their current home before buying a new one.
These are just some of the many pros and cons associated with a mortgage. Compare all of these details, among others, before buying a home or opting against it. There’s help to be had, but it’s up to you to make the final decision.
Would you add any other pros or cons to the list above?
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