When you’re writing those seemingly gigantic mortgage checks to your bank or your private lenders each month, probably the last word that comes to mind is advantage.
Private mortgage is something you don’t borrow from a bank. Instead, you borrow from lenders or friends. Whether it’s your only option, or one of many options, it’s worth learning the advantages and disadvantages before you go wrong with your pick.
A mortgage is cost-effective:
If you secure a loan against your property the interest rates on mortgages is lower than any other form of borrowing. This means the lender has the security that if anything goes wrong and you fail to repay the amount there is still something valuable. You can always sell off your property to pay back some of your debts if not the all.
A mortgage makes the process of owning affordable
For most people, buying a house is the biggest purchase and decision, they will ever make. A mortgage is an easy and affordable way of borrowing money. With a mortgage, you are able to spread the payments towards the house over many years. Since the payments towards the home are spread over years, the periodic payments are manageable and affordable.
Reasonable interest
With most mortgages, you will be able to get a very reasonable interest rate till the time you have a good credit points. When you get a low interest rate like you can with an investment mortgage, it can save you a considerable amount of money. For the cost of the loan, it is worth to get a mortgage instead of using your own good savings.
Tax Benefits
Income tax deductions are available if you have a mortgage. The interest you pay on your mortgage may act as your tax deductible. Private mortgage insurance and homeowners insurance at times provide tax deductions, if you qualify their criteria. So before such big decision a deep research is a must as you are mortgaging your valuable assets.
Time is precious:
If you are planning to borrow money against your mortgage from banks its needleless to say that you have to go through a lot of paper works which is time consuming and tiring. It’s a good idea to secure from the lenders because compare to banks terms and condition the documentation are quite less and the process is quite faster.
Well with all good things comes some side effects. There is no term like easy money.
Debt
Now whether you are carrying a bag full of jewllery or stones the one and only common thing about them is carrying something heavy which is quite uncomfortable. The most obvious disadvantage of mortgage is that you are carrying a huge debt. The other major drawback is that since the mortgage is secured on your property, you need to keep up with your mortgage repayments or you could lose your valuable property.
Pick the right pick
Getting a mortgage loan may looks attractive but the process is quite complex, and the options are endless. Few mortgage has fixed rate and the rate of interest is same for the life of the loan with steady payment amounts, but the interest on an adjustable-rate mortgage changes their colours like lizards which might get you bankrupt just in a blink. Scary things generally comes with a good package. Adjustable-rate mortgages are typically attractive products due to low initial interest rates, but your payment can double when the interest rate resets and could be a real pain to pay back that huge amount. So choose wisely.
Time is money
Though the monthly amount you are paying may seem reasonable for time being, but the total amount you pay back over the years is huge and almost you end up paying double the amount you have borrowed against your mortgage.
The Risk factor
Private loans aren’t paid back like a traditional mortgage with long payback validity. Many private-money lenders expect the loan to be repaid within an extremely short time period. Private lender often do look for quick and easy returns. So it’s really important to make a proper documentation of all the terms and condition in a proper agreement and just got go blindly with the word of mouth.
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