A mortgage is a huge commitment, as you will have to carry that financial burden with you for years to come. However, this doesn’t mean that getting a mortgage is a bad thing. In this article, we’ll discuss the 4 reasons why a big mortgage can be a good idea:
1. A mortgage doesn’t affect your home’s value
A home can be a profitable investment. The value of a house in a great location will only go up as time goes by, which is why there are so many investors who put their money in real estate. One of the biggest benefits of mortgaging is that the value of the property won’t change because of its status as being under a mortgage.
If you’ve done your research and you’re sure that the property value will go up, getting a mortgage for that property won’t affect the price in any way. You can see it as a long-term investment because your house will be paid off at some point, and the mortgage will just be a stepping stone for you before you can get all the value off of that property. The most important thing is that you have to make sure that you can afford the mortgage so that the house doesn’t get taken away as collateral.
2. Getting a mortgage won’t hinder your equity
The next reason among the 4 reasons why you should get a mortgage. You have the right to do anything with your house while the property is under a mortgage, so don’t worry about not being able to decorate or improve the home during the mortgage. This means that it won’t lower your overall equity in any way.
For example, if you buy a $500,000 property and you get a $400,000 40-year 3% mortgage with a $100,000 down payment, that $100,000 will be your original equity and it will continue to grow with each installment of the mortgage paid. If you pay each installment on time, the interest throughout the quarters of the mortgage will be incredibly low. As the value of your property grows, it will exceed the original investment that you put in, and all of the value that exceeds the initial investment will go straight to your equity.
3. A mortgage is the cheapest way to get a significant loan
When you think about it, a mortgage is the cheapest way for you to take out a significant loan. Sure, some credit card loans come with a 0% interest for the first few months. In that case, you’re not going to be able to get $200,000 out of it. You will not be able to pay it off in 30 years. Therefore, a mortgage is the most affordable way for you to start building your assets.
The interest rates on mortgage deals can be this low. This is because you’re agreeing to put your house up as collateral if you’re unable to pay off the debt. This gives the lender an assurance that they will get their money one way or another, which is why they can charge such low interest rates. They don’t have to worry too much about making ends meet.
4. Mortgage interest is tax-deductible
Lastly, out of the 4 reasons, this is of high concern. A mortgage loan is tax-deductible, which means that you can use it to reduce your total taxes. This can save you more money in the long run. For example, if you save $200,000 overall on taxes by buying a $300,000 house while paying $100,000 in interest. You save $100,000 overall.
If the mortgage lands you in the 35% tax bracket, you can get 35 cents back for the mortgage. This amount of money adds up very quickly. When you consider that you will be paying for years to come, it may actually save you more money. More than if you were to buy a house upfront.