Most Americans have been taught to stay out of debt for their whole lives, but at the same time, they are taught that a mortgage is a good type of loan to take out. This can be confusing, especially when you think about how much money a mortgage tends to be for. That amount of money can feel like a large amount of debt that most people don’t want to think or worry about. However, a mortgage can be helpful in many ways, and generally works to improve anyone’s financial situation.
A Property Appreciates
The first benefit to a mortgage is that the property you purchase actually appreciates over time, rather than depreciating. So unlike common loans for cars for example, you actually start to make money off your property and build equity over time, in addition to the payments you make. The appreciation of a home helps you to get more out of your investment, which can be hugely helpful for your financial security. Since cars actually lose value from the second you buy them, this is a huge positive for getting a mortgage.
There are also a variety of tax benefits that come along with owning a home and paying interest on a mortgage. If you itemize deductions, you can deduct the costs of interest and taxes on your federal return. It is important to look at how your itemized deductions add up against the standard deduction, because sometimes your itemization won’t actually save you more money. However, if you itemize your deductions it can help you to decrease what you owe on your taxes, which will bring down your overall expenses.
You Avoid Paying Rent
In most cases a mortgage payment is similar or less than the amount that you would pay if you were renting a similar property. And, at the end of your mortgage, you actually end up with a permanent home. So, instead of your money going to pay for someone else’s property, it goes towards acquiring your own. This is a great financial move that helps you to build equity and improve your financial security.
Your mortgage can help you to continually build financial security. It’s important to think carefully about any debt you undertake, but once you understand the debt you will experience, you can make smart decisions. Getting a mortgage that is within your means is a great way to prepare for your financial future.
Check out this article on the types of debt that are most destructive to your wealth!