Minnesota Association of Mortgage Brokers

Many prospective home buyers face dilemma in deciding whether they should buy their new home with cash or mortgage. If you are facing the same predicament then following information will prove helpful. If you want to live debt-free then you should avoid mortgage. However, it is not as simple as it seems. While mortgage is counted as debt, there are several benefits that make this type of secured homeowner loan a better option. In fact, you will be saving money with a mortgage rather than if you buy your home with cash. The first thing is to assess your present income, job security, and major future expenses like higher education of children. If you think you will be able to save sufficient amount of money in future to pay the monthly mortgage repayments, take care of your everyday expenses, and avoid any problem with major expenses then mortgage is perfect for you. There are many benefits of a mortgage.

Saving Money and Earning Better Profits

If you buy your home with cash then you may not be left with enough reserve money to take care of emergency situations like emergency medical bills. The same money that you use to buy one home can be used to buy a larger home or more than one home. Over the years, as your income increases, you will be paying less towards your mortgage repayment because the value of currency will increase in future. If you have chosen fixed interest rate then with increasing value of your income you will be paying less for your mortgage. Additionally, the value of your property will appreciate.

Investing in Other Investments

The same money that you use to buy your home in cash can be used to invest in other things. You may earn better profits over time and be able to use that money to reinvest. This will not be possible if you do not have money to invest because you spent all your savings on buying home. You may come across a lifetime investment opportunity but without cash you will not be able to invest. You may want to start a new business but that will not be possible. You cannot take care of your emergency financial needs when you do not have sufficient saving.

Tax Advantages

Homeowners are offered tax rebates on their mortgages. Depending on the income, you may be required to pay less tax because of your mortgage. You get tax benefits only for home loan and not for other types of loans.

Better Repayment Terms

Unlike other types of loans that are expensive to borrow, the mortgage is not that expensive. The reason is that the lender has an immovable property as security. Government also offers incentives to lenders for lending home loans.

Mortgage gives you financial stability and you can look forward to a better economic future. If you choose varying interest rate for the mortgage then you can take advantage of lower monthly repayment when the interest rate goes down. When you pay your loan repayments on time then it helps build better credit rating which proves advantageous when you apply for a loan.