I really don’t like being in debt.
I refuse to use credit cards if I can’t pay them in full at the end of the month. And I haven’t taken out a car loan in nearly 20 years, preferring instead to smash my car into the ground before paying cash for a new one.
However, despite my aversion to loans, I have a fairly large mortgage loan… And I don’t mind that I have money for a house. Here are three good reasons why this is the case.
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1. Home ownership contributes to the growth of wealth
Most of the time, when you borrow money, you end up using it for services or assets that won’t retain their value.
If you get it vacation loanFor example, you will enjoy the trip, but you will have nothing to show but pleasant memories. And even if you take out a car loan, you are borrowing to buy something that will be worth much less money than you paid for it by the time you finish using it.
A home loan is another matter. When are you doing To buy a house, you will eventually become the owner of this home for free and can continue to live in it without paying for the house. This makes it a very valuable asset. You also have the option to sell it in the future if you want, and hopefully it will cost you more than you paid for it.
For this reason, a home loan helps you improve your net worth and increase your wealth over time. It is worth borrowing in order to live better in the end.
2. My mortgage interest rate is very low.
Many types of debt carry high interest rates. In fact, most types of loans and credit cards can carry interest rates above 10%. The higher the interest rate, the more expensive your purchase becomes and the more money you put in the pockets of lenders rather than keep for yourself.
Mortgage rateson the other hand, it tends to be very low – especially in recent months. Since the rate on my loan is below 3.00%, the interest expense is hardly higher than the inflation rate. And the interest rate is much lower than the potential profit that I could earn by investing my money in Stock market – even in a very safe investment.
Since I pay almost no interest, I would rather borrow on my home than pay cash for it, as there is little reason to tie up so much money when I could invest elsewhere and get a higher return on investment (ROI).
3. Interest on my mortgage is not tax deductible.
The interest I actually pay on the mortgage is even cheaper than the 3.00% rate would suggest.
This is because I list my taxes, which means that interest is not taxed. Because I can claim the interest I pay and reduce my taxable income, the government subsidizes some of the cost of home ownership. Taking advantage of this tax credit makes my mortgage even cheaper.
Since my loan costs me so little as well as helps me become the full owner of an asset that will ultimately leave me with a higher net worth, it should be easy to see why I don’t mind getting a mortgage.