Why Mortgage Is Accepted Across All Tax Brackets

“Creditors have better memories than debtors.”- Benjamin Franklin

Having a roof over your head is part of the American dream. Thanks to the affordable mortgage schemes in the US, we can have one without having to wait our entire lives for it. But aren’t mortgages expensive? Doesn’t the interest accrued over the tenure of the loan make up a big fortune? What if we tell you that mortgaging if done right, is actually a sound financial decision? Even if you have the means to pay in full.

One of the traits common to wealthy people is that, instead of working more for money, they make their money work for them. For the uninitiated, it would make sense to think that if you are wealthy, you may shell out cash upfront to buy a house. But this cannot be farther from the truth. Apart from winning the lottery, both literally and metaphorically, people usually amass wealth by doing things differently. Wealthy men and women often choose to finance their homes with mortgages, even if they can buy the property outright. Don’t believe us? Dive right in.

1. Beat Inflation

Ever since the days when the coronavirus had started making headlines on TV, inflation in the United States has been bouncing at around 5 percent. This is over a full 150 percent increase from the historical averages of the previous decades. With Jerome Powell steering behind the wheel, inflation is here to stay. For most Americans, getting a mortgage can prove to be a useful tool for tackling inflation. Getting a mortgage will allow you to borrow money in today’s dollars. You can repay it with inflated, cheaper dollars in the future. This strategy will give you the benefit of having inflation and time on your side. .

2. Opportunity Cost

Wealthy people understand the concept of opportunity cost. If you live in the house you own, it is not an income-generating asset. Quite the opposite. You actually have an outlay of capital for the maintenance and repair of the house. By choosing to finance the home purchase with a mortgage, wealthy men and women free up their capital. This money can be put somewhere else where the returns are better than the mortgage interest. It can be a business or an investment. When the situation is favorable, wealthy people don’t fear getting financial leverage to reinforce their position. Mortgaging a house is one way to do that.

3. Generating Income

With the rental yield of houses touching two-digit rates in some major cities, mortgaging has emerged as a viable investment vehicle. If you mortgage a property that gives you returns that beats the interests payable, your tenant will pay off your mortgage debt. If you are taking a 30-year mortgage, you might be able to make a passive income out of the deal even after covering miscellaneous costs. By the end of the tenure, you get the house’s full ownership.

4. Save Liquidity

Do not forget that real estate property is not a liquid asset. Buying a house outright can tie up a significant portion of your wealth. This can lead to a situation where one has wealth but can’t spend it. This can come at the cost of an emergency fund or life insurance. Two very good options that can help you maneuver the uncertainties of life. Having sufficient liquidity will give you the financial agility that can come in handy during testing times.

5. Tax Benefits

There was a time when having a mortgage was the go-to strategy for getting deductions on income tax. Under the new tax laws, standard deductions have been doubled and almost 90 percent of the taxpayers now have zero benefits from the mortgage interest deduction. But if you fall into a higher tax bracket you are eligible for some trivial benefits. Money is money. We recommend you claim your benefits whatever you could unless you got a more lucrative investment opportunity.

6. Credit Score Boost

Credit bureaus love mortgages. Your payment history makes up one-third weightage of your credit score. Mortgages temporarily hit your credit scores but improve it moving forward, once you start making the payments. Making timely mortgage payments is a testament that you are a creditworthy person and you can handle large loans. A few years down the line, this will give you a significant boost to your credit score. As against other loans like credit card debt and vehicle loans, that carry exorbitant interest rates, mortgages are considered good debt by credit score companies.

7. Mitigate Risks

When you mortgage, your house will also serve as the primary security for that loan. That means, if you fail to make timely payments, the law allows your mortgage lender to take possession of your house. Nobody wants to be in that position. But you can actually use it to your advantage. Since your lender now has stakes in the transaction, they will do whatever in their capacity to make sure that you will be able to pay them their money back. Being professionally managed financial institutions, your mortgage provider often has the kind of expertise you can’t afford to reach your home-buying decision. The lender will do their due diligence and make sure that you are getting a good deal for your money and also that the property you are buying is legit and without any additional liabilities. Also, when you are buying your house with a mortgage, you are sharing your risk with the lender.

To sum it up, if you are a person who seeks the security of living in a house you own, mortgaging is more than right for you. Even if you are planning to move into a house you own only after retirement and currently parking all your savings on risk-free investments, mortgaging is still the right choice for you. Finally, if you are overwhelmed by your mortgage process, Auctor Business Solutions offers services that make your mortgage a seamless experience.