The Advantages of a Mortgage

When you're writing those seemingly endless gigantic mortgage checks to your bank each month, probably the last word that comes to mind is "advantage." A more appropriate word might be "pain." But there are several advantages to having a mortgage, so a little short-term pain can often result in long-term gains.

Tax Break

Your mortgage may be the biggest tax break available to you. You can generally deduct any interest you pay on your mortgage loan, which is especially important during the early years of the loan, when most of your monthly payment consists of interest. If you purchase points, which is the process of paying an additional percentage of your loan up front in exchange for a lower interest rate, you can also deduct their purchase price.

Building Equity

As you make your loan payment each month, you may feel like your money is disappearing into a bottomless pit. In reality, you're building equity, which is your ownership stake in the home. As your equity grows, you can use it as a source of funds by taking it in the form of a home equity loan or line of credit. The interest you pay on either of these may also be tax-deductible.

Pot of Gold

You're probably hoping for a pot of gold at the end of the rainbow. Many years from now, when your home is finally paid off, it is entirely possible that it will be worth much more than your original purchase price. As a result, you'll own a valuable asset that you can sell for a large profit or leave for your kids upon your death.

Sign of Stability

Owning a home is a sign of stability that can offer you additional benefits. If you need a loan for other reasons, like buying a car or taking on another large expense, the first thing that lenders will probably look at is whether you own a home and whether payments are current. This demonstrates that you can handle credit responsibly and that you're less likely to "skip town" or default on your loan.


About the Author

Chris Joseph writes for newspapers and online publications, covering business, technology, health, fitness and sports. He holds a Bachelor of Science in marketing from York College of Pennsylvania.