Saturday, November 20, 2021

3 Reasons to Get a Home Loan

When it comes time to buy a house, most buyers will have to resort to a home loan. Although it may be tempting to save up and pay for a house in cash, getting a traditional mortgage is a better option for the overwhelming majority of consumers.

Here are three reasons you should consider getting a home loan when you buy real estate.

You'll Be Able to Buy Much Sooner

The most obvious advantage of a home loan is that it will allow you to buy and move into your new house much sooner. For all but the highest income earners, saving to pay for a house in cash can take years or even decades.

During that time, you'll have to continue paying rent that could otherwise be spent making payments on a home of your own. In almost all circumstances, the ability to buy quickly and begin building equity in your own property makes a home loan a much better solution than saving to pay for a house out of pocket.

Your Money Can Work Harder

Even if you have enough saved to buy a house without a mortgage, there's still a fairly strong argument in favor of home loans. Mortgage rates, particularly these days, are very low.

When compared to the historical average of the stock market, you'll actually come out ahead by investing your money while paying a much lower rate of interest on your mortgage.

While it may seem counterintuitive, your money will actually work harder when you invest it than when you save it to put toward a home.

Home Loans Provide Protection Against Inflation

As recent experience has proven, high inflation can quickly eat away at your savings. This can be a serious problem when you're saving toward a purchase as large as a house.

When you take out a loan, though, your payments are determined at the outset. This means that even during periods of higher inflation, you can predict what you'll have to spend and not have to worry about your payments rising.

It should be noted, though, that it only applies to fixed-rate loans. If you take on a home loan with a variable interest rate, you could see your payments increase if interest rates rise.

As you can see, there are many good reasons to finance your home purchase with a loan. While there are exceptions to every financial rule, the vast majority of home buyers are better off using home loans than trying to save and pay for their new homes out of pocket.

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