Sunday, August 11, 2013

The Benefits of Mortgages for Boomers

Many home buyers are under the mistaken impression that they should try to purchase in cash. While cash-buying can certainly result in some benefits for home buyers, it also robs them of the chance to take advantage of the benefits of a home loan.

Even though most people may view mortgages as simply a debt that must be paid off, home loans come with their own advantages.

Flexibility


If a home buyer opts to only make a purchase in cash, their options dwindle considerably. Many properties may be out of their price range, narrowing their choices. Mortgage borrowers, however, have the freedom to choose the home of their dreams, not just the home they can pay for upfront.

Mortgages also give home buyers more flexibility in how they can pay off a home. Different payment plans can be selected, and if interest rates fall in the future, borrowers can refinance their loans to take advantage of the savings.

Protection


While paying for a home in cash may seem like a great way to prevent the risks associated with loans, it will also generally wipe out an individual's savings. This means that if another issue arises which requires financial assistance - medical treatment, college tuition, etc. - they will be at a disadvantage. A mortgage borrower, on the other hand, will be able to hang onto their cash in case such a situation occurs.

Additionally, many home buyers often forget that the costs of a home go beyond the purchase price. Closing costs must be accounted for, as well as things like maintenance and repair. Buying in cash can leave home buyers at a disadvantage when it comes to financing these things.

Taxes


Mortgage interest is tax deductible, as is the interest on a home equity line of credit. In addition, borrowers can roll the costs of property taxes into their loan amount, making it easier to pay them as part of a monthly bill.

Credit


All debt is often lumped into the bad category, but there's a difference between good debt and bad debt. A high-quality mortgage qualifies as good debt on a person's credit report, and as long as they stay current on their loan, it can give a big boost to their score, making it easier to borrow money in the future and receive low interest rates on credit cards.

Time


The greatest benefit of home loans is that they allow buyers to make a purchase sooner rather than later. Chances are cash buyers will have to put off homeownership for a long time in order to save up enough money. Depending on the market, waiting too long can make the cost of a home even more expensive, which in turn means having to wait even longer. Mortgage borrowers are able to finance a home purchase when they want to, giving them the freedom to make homeownership a reality.


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