What is a mortgage? It is a type of loan that is under a legal agreement with a bank, private lender, or credit unions wherein you put your house as collateral in case of default. Borrowers can be homeowners or business owners that use their homes or commercial property to apply for the loan. You can use a mortgage loan for acquiring a new property whether it’s for your business ventures or looking for a new home.
You need to understand that there are different types of mortgage loans. They vary depending on the requirements needed, interest rates, downpayment, etc. Aside from realizing it’s differences from each other, you need to evaluate the pros and cons before you apply for a loan.
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Advantages
Increased Buying Capacity
Nowadays, many people can’t pay in full for a new home or property. It is because the price of properties continue to rise while there is a slower increase in the salaries of an individual. So when you apply to a mortgage lender Grand Prairie, you can have a better buying capacity to select a new house making it even possible to choose what you want rather than what is feasible with your budget.
Helps Your Credit Score
If you have a good history of payment with your mortgage loan, you can easily apply to other loans with lower interest rates. You make a habit of settling your bills on time which will build up your credit score and in return makes you a great candidate when you apply in the future.
Have Tax Benefits
When you have a mortgage loan, it gives you the opportunity to apply for income tax returns. The government will decrease the tax that they deduct from your salary. Having tax benefits makes borrowers consider getting a second loan for their new house or property.
Disadvantages
Returning More Than You Borrowed
When you get a mortgage loan, there is a particular interest that you will have to pay. You’ll start to notice the weight of the interest when you begin to pay your monthly bills. If you’re not careful enough and don’t have the time to study the interest rates of a particular lender, a large chunk of your money may only proceed as payment for the interest
Paying For Extra Charges
Aside from the interest that you will have to pay, there can be hidden or extra charge that comes with your mortgage loan. These charges can be for the insurance fees, legal and survey fees, closing fees, etc. You may overlook these charges, but it will also reflect on your monthly payments.
Read this: The Hidden Costs Behind Your Home Loan — And How To Minimize Them
Possible Risks
In the case of late payments or being unable to pay your mortgage loan, you are at risk of losing your home or your business properties. The lender will have the right to evict you in your home or commercial property and get ownership. It will also have a negative impact on your credit score which will also reflect in your credit history for years. The high credit score that you have built up from the past years will fade away if you’re unable to make all the payments in your mortgage loan.