The advantages of buying and owning a home are numerous, and some of them aren’t as obvious as you might think. Purchasing a home is a big move in terms of your credit rating and credit history. The borrower who gets approved for a mortgage loan and makes all payments on time establishes themselves as a good credit risk, but that’s only one advantage among many.
The faster you pay your mortgage, the more equity you build.
When you get approved for a home loan and begin making payments, your monthly mortgage obligation includes paying on the interest on the loan, and the principal balance. Borrowers who pay more than the minimum required every month pay down their principal balance faster, creating equity.
What is equity?
According to Wikipedia, “Home equity is the market value of a homeowner's unencumbered interest in their real property — that is, the difference of the home's fair market value and the outstanding balance of all liens on the property. The property's equity increases as the debtor makes payments against the mortgage balance”.
What are the advantages of building equity?
For some borrowers the most desirable element of building equity is the ability to borrow against that equity later in the form of home equity loans, reverse mortgages, or other loans that may be available.
This is considered an advantage because of the “rainy day” factor. Some borrowers don’t plan on taking out a loan against their equity even as they pay it down, but prefer to think of that equity as protection against the unexpected - a medical emergency, college expenses later on for children or grandchildren, etc. Home equity is a financial advantage, especially for the borrower who is careful to avoid missed or late payments, etc.
Turning your home into an income property.
Owning a home also means the ability to turn that home into income later down the line. The borrower who decides to move out of the home and rent it out, or rent out unused units in a multiunit property may find a previously unexpected source of income and/or mortgage payments based on this use of the home.
Certain types of loans such as VA or FHA mortgages have an occupancy requirement for the borrower, but depending on the timing of your decision this may or may not be a factor. But the option is an important one to consider when evaluating the financial benefits of home ownership. Becoming a homeowner can be a great investment for your future.
Don't think you qualify for home ownership because of your credit history? Call MSI Credit Solutions now. We're here to help.
Are you trying to qualify for homeownership? Do you think your credit does not qualify or meet your lenders minimum requirement? If so, we encourage you to consult with a credit expert like MSI Credit Solutions to learn about your options. MSI Credit Solutions leverages your consumer rights by working on your behalf. MSI's process will assist you with removing questionable negative items from your credit report, resulting with an increase to your credit scores.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
*The information in this article has been provided strictly for educational purposes.