Is Taking Out A Home Loan Right For You? A First-Time Homeowner’s Guide
Buying a home is one of the biggest dreams of everyone. You can now buy a property even without cold cash, thanks to different financial options. One is the home loan, wherein you can get funds to buy a home through monthly payments to the lending institution. It may take years for you to pay the full amortization or monthly home loan, but it’ll be worth it.
Instead of renting and not owning the property even after years of renting, apply for a home loan so you can pay for it monthly and own the property after some years. That being said, it’s also best to check on the following to gauge if a home loan is right for you:
- Buying A Home Becomes Affordable
While saving for your dream home is a good option, it may take more than a year or so before you can save up for it. Sometimes, inevitable circumstances will make you take out your savings, causing you to go back to the start of saving for your home.
But with a home loan, you don’t have to save for years. If you have a steady source of income, applying for this loan will make you acquire a home faster. You can even find home loan providers who offer longer tenure, like 15-20 years, making your monthly amortization more affordable.
You can use a home loan budget calculator to know how much you’ll be paying monthly, depending on the length of your loan.
Some home loan providers don’t even require you to have a significant amount of cash as a down payment for the property. You can pay the down payment for a couple of years without exhausting any of your savings.
Most importantly, having a home loan allows you to buy a more affordable property. As years go by, property values are more likely to increase. The property you may be saving up for right now may double its price after some years. You’ll need more money if you’re planning to buy it in cash, but if you want to buy the property while its price isn’t yet increasing, get a home loan.
- Enjoy The Liquidity Benefits
Even if you have the cash to pay your property in full, it’s still wiser to take out a home loan. One reason for that is you won’t have to take out emergency or personal loans to cover your emergency needs. Since you don’t have cash left in your account, you may be left with no choice but to take out other loans. The negative side of such is that you incur at least 15%-30% interest per year.
On the other hand, home loans range from 2% to 3% interest rate. This means you don’t have to take out loans with high-interest rates because you have your spare funds in case of emergencies.
If you want to avoid paying a high interest from taking out loans due to life’s uncertainties, then keep your savings instead of using them to buy a property.
- Take Advantage Of Equity
As mentioned, your home’s property may be worth much more after some years. Even if you’re worried that your home’s value will fall, taking out a new home loan or home equity loan is recommended. This is a better solution than selling your property.
With a home equity loan, you can protect the value of your property without the need to sell it. Here, you’ll have to get a new home loan so you can get the equity out of your property. This means you get to ‘sell’ your property to a new home loan provider or loan. Meanwhile, you get to enjoy the increased value of your home from ‘selling’ it to a new mortgage.
- Build Credit
Another advantage of taking out a home loan is to build your credit score. This means that if you’re consistently paying your monthly amortization on time, your credit score goes higher. So, if you don’t have credit yet, or have a poor one, a home loan can help you build up your credit history.
Nowadays, you don’t need to have thousands of dollars to buy your first home. With a home loan, you can live in a house you’ll own after some years. Instead of saving to buy a home, this financial solution will make your dream of owning a property a reality. With the mentioned benefits above, you now have an idea if a home loan is right for you.