Certainly, a home mortgage can be a great idea, provided that you are in the right financial position and that you have the right frame of mind. However, a lot of people enter into mortgages for the wrong reasons. Below are reasons why racing to buy the house with a mortgage is not a great idea.
Points to Consider
Life Gets in the Way
Mortgage agreements generally fall into either 15-year or 30-year categories. Some people like to think they can outsmart the system and obtain 30-year mortgages, with the intention of paying the 30-year option off as a 15-year option. This idea is great, and it will probably work for about a year or two. However, life gets in the way, and suddenly the mortgage is taking second place. It comes after school trips, braces, insurance policies, and even groceries. The interest on the debt accumulates to the point of no return for some people. In essence, it might be wise to avoid a 30-year mortgage.
Always in Debt
Being in perpetual 30-year mortgage debt should not be anyone’s dream. Living in debt for longer periods of time has the following negative effects in daily life:
Increased monetary stress upon spouse and family members
Lower standard of living, with large sums of money going toward a loan each year
General anxiety about one’s financial situation
Higher potential for late payments or mortgage fines
Entering a mortgage should therefore only be done after careful consideration. A 15-year mortgage will have you out of debt sooner, lifting that unfortunate weight off of your shoulders.
Can You Get It Right?
Use a Mortgage Calculator
Using a mortgage calculator is one way to get a better understanding of how much you can expect to pay over your selected period of time. Thus, use one to manage your expectations. Even more, look at your repayment rates for a 15-year period compared to a 30-year period to get a clear financial picture for the foreseeable future. Oftentimes, 15-year mortgages are the better bet!
Ask a Lot of Questions
Before getting into any long mortgage agreement, ask as many questions as you can. A mortgage broker will be able to give you the best advice. Make sure that you are clear on the following:
The breakdown and layout of your 15-year or 30-year plan
Your exact repayment rates
Things that are likely to affect your debt over the next 5, 10, 15 years
A home mortgage is a great idea when you enter into it the right way. However, enslaving oneself to a repayment system for the next 30 years is not a great idea.