Advantages and Disadvantages of Mortgage Loan 

If you want to purchase a house without paying everything at first, then a mortgage loan is perfect for you. A mortgage loan is a legal contract granted by a lender or a bank to a person with her property as security. You are going to repay the loan along with other costs and interests. The contract ends once everything is paid. If you’re talking to real estate agents, ask them about the mortgage loan and what’s the best for you.  

Mortgage Loan

The following are the advantages and disadvantages of a mortgage loan.   

  • Cost Effective  

A mortgage loan is cost effective both for you and the lender. The lender doesn’t have to worry about the loan not being repaid because your property is the security. If something goes wrong, the lender can sell the house to cover the debt. It’s cost effective on your part because the interest rate is lower compare to other loans.   

  • Buying Capacity 

The cost of real estate properties has been increasing over the years. People’s salary couldn’t amount to the cost of a house or a land, so most of the time people don’t think of buying one. With the help of mortgage loan, people are assisted with buying a property. Your buying capacity is increased because the loan will definitely help you own a house.  

  • Easy to Repay 

When you get a mortgage loan, you will be given lengthy amount of time to repay it. You can pay the loan monthly. For example, there are loans that you can avail for a 25 year term, which means that you will repay the loan for the next 25 years. The repayment is going to be easy because your salary is also a basis on the monthly amount you are capable of doing.  

  • Tax Benefits 

When you avail a mortgage loan, you are also qualified for income tax benefits. This means that the amount of tax you’re going to pay to the government is reduced. What you will pay is excluded from the tax. This is the reason why most people apply for a second loan for a new house or property because of the tax benefits.   

  • Better Credit Score 

If the current status of your mortgage loan is good, it means that you will be guaranteed with a good credit score too. This means that if the installments are paid in time, you can get other loans with low interest rates.   

Disadvantages  

  • Paying More than Borrowed 

Of course since it’s a loan, you are expected to pay more than you borrow. When you pay back the loan, you pay the principal amount plus the interest. That’s why you should compare the interests offered by the lenders because others charge more.   

  • Affected by Loss of Property Value 

The value of a property is not retailed forever. It will keep on changing which depends on the market fluctuations. This will result to the increase of mortgage rates. If you can’t keep up with the installments, you might experience foreclosure.