Mortgages: Are they right for you?

Owning a house comes with lots of joy and fulfillment. You will be free from monthly rent payments and other inconveniences that come with being a tenant.

However, it can also be challenging, especially when you do not have adequate finances to purchase your dream home. You will need to go for a housing loan to finance your home. Below are the pros and cons of a housing loan.

Advantages of House Loan

Buy Your Dream House

If you plan to buy a dream house and yet do not have finances, you may not own one soon. Even if you start saving money from your business or your salary, it can take you years to accumulate enough funds to buy a home. However, if you go for a housing loan, your capacity increases, allowing you to purchase your dream home immediately.

Low-Interest Rate

A home loan comes with a low-interest rate, unlike other loan types. This is because the lender can repossess the property if you fail to repay your loan in time.

The home acts as security for the loan. The lender can sell it and recover the money. As you plan to take a home loan, ensure you identify a lender who offers the best interest rates.

Mode of Saving Money

We all know that it takes a lot of discipline to save money. It gets a bit challenging when you have cash at hand because you can use the money for other things that may not benefit you.

Taking a housing loan can be a compulsory way to save money because paying back the loan is an investment for your home. You can look at the money as savings instead of expenditure.

Guarantees Property Safety

When you apply for a housing loan, your lender does a background check to ensure that the home you plan to purchase does not have legal issues.

The lender also ensures that the builder is credible with no integrity issues. You will not have to worry about any challenges because the lender ensures that the clearance certification comes from the local authorities.

Disadvantages of Home Loan

Be Ready for a Huge Commitment

One major disadvantage of acquiring a home loan is that you must commit to a long-term payment plan. This means that you will spend 10 to 30 years paying the loan. You will have to begin minimizing your expenses until you clear the debt.

During the period, some people often find it challenging to acquire other loans. So, before you decide to go for a housing loan, ensure you understand the effects and get prepared well to avoid inconveniences and frustrations.

Home Loans Come with Risks

Once you take a home loan, you’ll need to start repaying based on the loan terms. While this is inevitable, you may not have control over other things that may arise during your repaying period.

You might encounter challenging situations that can prevent you from paying your loan as expected. For instance, you can lose your job, get ill, divorce, or get injured in an accident. Such incidences are often sudden and may require huge finances, leading to financial constraints.

In this case, you will have to channel the available finances to medication or taking care of unavoidable expenses instead of paying your loan. This is a risk that might lead to the repossession of your property by your lender.

Loss of Investment

When repaying your housing loan, you may have limited finances to invest in other areas where you can generate extra income. A housing loan does not give you any profit. Instead, you have to spend money repaying it.

For instance, if you were to buy shares or invest money in a profit-making business, you may not be able to actualize it because such investments require huge capital. Since you will channel the funds in repaying your loan, you lose opportunities to generate income. Know more why you should start investing in real estate.