3 Benefits Of Mortgages
Most people do not have the cash to buy a home outright. Fortunately, even if you do not have the cash, you can still live the dream of being a homeowner by purchasing a home loan. Securing a mortgage with your personal bank or another lender is possible if you qualify. It may be frightening and seem financially overwhelming, but there are benefits to having a mortgage. Other than having the ability to buy a home, here are a few other benefits of having a mortgage.
Tax Benefits
One benefit many homeowners forget about is that owning a home and having a mortgage offers many tax benefits.
When you file your taxes, owning a home and having a mortgage can both offer deductions. For example, homeowner's insurance and property taxes, which are paid each year if you own a home, can be deducted from your total gross income.
Deducting your mortgage interest is also a tax benefit. The amount of interest you pay throughout the year adds up to being a nice deduction on your taxes, reducing your total taxable income.
Credit Benefits
Building credit is not easy and restoring problems with your credit can be even more challenging, but having a mortgage and making timely payments will help. Even if your credit was not great or perfect when you first closed on your mortgage, paying your monthly mortgage payments over time will help improve your credit score.
The key to having a mortgage that helps your credit score is to make the payments a priority. Of course, closing on a loan that is not financially overwhelming is also key, so make sure to buy a home at a reasonable cost when you know you will be able to afford the monthly payments.
Equity
A home is an equitable asset, meaning it will most likely gain value over time even though you will owe less on the mortgage than what you initially purchased the home for. A mortgage balance that is lower than what the home is worth ensures the home has equity.
There are many ways to use this equity if and when necessary.
You can choose to sell the home at any time, pay the mortgage off, and have the equity to put down on another home or use the equity for other purposes. There are also mortgage options that allow you to refinance, pulling the equity out as cash to use for home renovations, which increase value even further, or to pay debt and other expenses. Consider working with a financial advisor and your current lender to determine if using the equity is smart.