What Exactly Is A Mortgage And Why Do You Need It?

Written by  //  2016/08/31  //  Home Financing  //  No comments

A mortgage is a loan product that helps borrowers finance a home purchase or help them gain access to the equity in their homes. Homeowners may generally refinance their loans whenever it is practical to do so without penalty. Let’s take a look at these and other reasons why mortgages are so popular among property owners.

Most People Don’t Have the Resources to Buy a Property With Cash

The average person doesn’t have $100,000 or more on hand to buy a home or other property outright. Therefore, it is easier and more convenient to contact different lenders about borrowing the money now and paying for the house over time. There are tons of resources out there to help you be able to finance your new home. All you have to do is put forth the research to find them.

Mortgages May Provide Multiple Financial Advantages

There may be good reasons to take out a mortgage even if you could afford to pay for a home in cash. First, the interest on the loan can be deducted from your taxable income. Second, interest rates are at historic lows, which means it may not cost that much more to borrow than it would to pay for it upfront. In the meantime, you can invest your cash in stocks and bonds and earn a return that is higher than the interest you will ultimately pay on the loan.

Use a Mortgage to Gain Access to Your Equity

When your property is worth more than what you owe on your loan, you are said to have positive equity. However, that equity exists only on paper unless you liquidate. As selling a home or any other piece of real estate can be a long and complex process, a home equity loan may be preferable. These are often referred to as second mortgages, and lenders will put a second lien on your home or other property as collateral. Once you have the money in your bank account, you can use it for any reason including to pay bills at a low interest rate or put an addition on the house that could further increase its value.

When it comes to seeking a mortgage you make want to talk to a realtor, such as those at EXIT Lakes Realty Premier, so that you can get as much help as possible. When you are looking to buy or refinance a home or any other property, it may be a good idea to get a mortgage to do so. You can borrow hundreds of thousands of dollars at reasonable and often flexible repayment terms. Additionally, you can usually prepay the loan at any time or refinance when it makes sense, so you are never locked into a loan you don’t want or need.

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