There comes a point in our lives where we have our career in place, a growing family and all that’s left to complete is your own home. Decades ago, when we plan to buy a new home, it is necessary that we are able to save enough money to purchase a house. Nowadays, having a good source of income and sufficient amount of savings, you can get yourself a home through a mortgage plan.
Mortgages are means provided by a bank or other financial institution by lending an amount to the borrower that will be used to purchase the property. The borrower in turn will pay the bank or financing institution back through amortizations.
If you are planning to get a house through a mortgage, here are the advantages and disadvantages that can help you when applying for a mortgage.
- Makes buying a home more affordable. Because of a process known as financing, the process of buying a home becomes more affordable. It allows an individual to pay for a new home through amortizations and without the need of coming up with the entire purchase price of the property.
- Cost effective than other forms of loans. When you purchase your own home through a mortgage, the property is placed on lien against the loan. The property serves as the collateral over the borrowed money. Because of this, the interest rates are lower than other loans due to the secured nature of the loan.
- You pay more than what is borrowed. Like any other loan, the total amount you pay is more than the actual purchase price of the property you purchased. Because of the interest rates, higher amount is actually paid to the bank or financial institution that offered the mortgage.
- Long Term Repayment. One disadvantage of a mortgage is long term payment periods. Because of the big amount that is being financed, a longer term of amortization payments help minimize the amount to be paid monthly. This makes the loan affordable to everyone who wishes to purchase a home.