The mortgage form of loan is generally used by people who are planning to purchase a property or by people who are taking a loan for some other purpose.
The term generally implies that a property that is owned by the borrower will be put up as security while signing up for a loan. That is the basic concept of mortgage loans.
Plus, if the borrower is not able to pay back the loan, the the lender will have full rights to seize the property and sell it, in coverage of the remaining amount of money that is left to be paid by the borrower.
The biggest condition stated here is the fact that the property might be possessed by the lender in the end if you are not able to pay back the loan.
Why does this have to stop you from opting for a mortgage loan? It is filled with a lot more advantages!
Read on to find out seven reasons why many people choose mortgage loans!
It is a Much More Affordable Option
Buying a house is one of the biggest dreams that any individual would have. It is also one of the biggest purchases you will ever make.
It makes a lot of sense to opt for mortgage-based loans because of the fact that you will be able to pay off the entire amount in spreads over a period of time until when the property will eventually be yours.
The advantage with mortgage loans is the fact that any amount of money can be paid over the term of the mortgage monthly which is what makes this an affordable option.
Lower Interest Rates
Because it is secured against your property, a mortgage will have a lower interest rate when compared with other forms of loans.
This is because of the fact that, as mentioned before, when you opt for a mortgage, the security you use to cover it in case of emergency will be sold off by the lender in the off chance that you are unable to repay your monthly term fees.
Ability to Buy
With home prices increasing day by day, it creates an impression that homes are not as affordable as they used to be and that people’s buying capacity is low.
This is not true, however. Mortgages help people buy houses and it makes it that much more easier.
Ease of Repay
Mortgages can be paid back in small amounts over a period of time. For example, you have taken a mortgage for the period of thirty years.
This means that you can pay a monthly installment of a fixed amount, which will not be much and this installment will not be more than your monthly salary, and this makes repayment easy.
Benefits of Tax
Taking a mortgage loan can severely reduce the amount of overall tax you have to pay to the government.
You get automatically qualified for these benefits once you opt for a mortgage loan.
Mortgage loans, like any other forms of loan, have incurs you to pay interest and in the case of mortgages you will be excluded from paying taxes for the loan.
Increase in Credit Scores
You can be assured of an increase in credit scores if you opt of mortgage loans.
Since the monthly amount to paid will be less, most people will be regular in repaying the loan amount.
This regularity will help you increase your credit scores because when CIBIL tracks your monthly payments of loans, they will see a consistency in the amounts you have paid and when you have paid them.
Paying loans on time would considerably improve your reliability with respect to your creditors.
Fixed-Rate Mortgages all the Way
In fixed-rate mortgages, the amount you would have to pay every month is calculated by the following method: the interest rate multiplied by the principal, added with a small percentage of the initial principal itself.
Because a little bit of the principal is paid off each month, the amount of total principal that remains over the end of the month will be less, and as a result, you will have to pay a lesser amount of principal each month.
Eventually, a lot more of your monthly repayment will go towards the principal amount itself.
In this situation, there is a predictability in the amount you would have to pay every month and hence you can keep funds allocated for each month that you have to pay back.