Commitment can be hard for some consumers, which is why it is understandable that getting a mortgage can be a scary thought.
However, home loans are the leading way people buy the house of their dreams. Plus, financing provides more than a means to get a home and pay for it over time. It also helps you improve your financial standing.
Here are some of the benefits of committing to a mortgage:
You get exclusive tax deductions
For some people, tax season is like a second Christmas, but this time the IRS brings the gifts rather than Santa Claus. One of the agency's unique goodies for homeowners is the home mortgage interest deduction. When you file your Form 1040, you can deduct every penny of interest you paid during the calendar year. You qualify for this deduction as long as you're using your property as your main home or second home.
You free up money for other investments
Real estate loans allow you to set more of your cash aside for other purposes. If, for instance, you've saved enough for a 30 percent down payment and need to put only 20 percent down, you can hang on to the remaining 10 percent. This money can be used for renovations, an emergency fund or to open a savings account for a long-term goal.
You can build credit
A home loan is a sizeable debt to take on, and you'll need to make on-time payments for a long period. While it can be difficult to foresee your financial standing down the road, staying current on your mortgage is one way to ensure your credit remains intact. Because a home loan is debt, on-time payments are reflected in your credit report - late payments too. If you stay on track with your bills, your credit score may increase, thereby giving you access to more lines of credit when you need them.
You can build equity
Along the same vein of making on-time payments, paying your mortgage bills helps you increase your home's equity. As you continue to invest in your house over the years, your payments will go more toward the principal balance than the interest, and your equity will rise. Eventually, you can borrow against this value with home equity loans.
For more information about smart ways to manage your finances, contact Landmark Bank.
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