Many individuals dream of owning a home. Unfortunately, it’s out of reach for them due to expensive housing costs. Therefore, some prospective homeowners opt for home loans.
What are home loans? They’re the types of loans you borrow from a private lender or a bank that you agree to pay back according to a specific schedule. If you’re unsure about getting one to pay for a house, read the following pros and cons to aid you in your decision.
Pros of home loans
There are a few benefits to obtaining a home loan including:
- Tax breaks: When you take out a home loan, you receive breaks on your income taxes. The interest you owe towards your loan decreases since it’s deducted from the total tax value, resulting in lower tax fees.
- Reasonable credit score requirements: Some loans — like certain personal loans — require at least a score within the 700-800 range. If you want a home loan, you only need a minimum credit score of 500 to 620 to qualify.
- Usually more affordable than rent: Many tenants lose money on rent payments because they experience yearly rent hikes. You don’t need to worry about this as a homeowner.
Cons of home loans
Home loans also have some drawbacks like:
- Long repayment commitment: Unless you have lots of money to spare, it can take years to pay off a home loan. This can also be an issue if you live paycheck to paycheck.
- You could have your home repossessed if you fall behind on payments: When you default on loan payments, creditors could use tactics like liens or levies to take your home and resell it.
Taking out a home loan is convenient but risky. Consider reaching out for legal guidance to address your concerns and questions.