Although home loans can be beneficial in certain situations, there are definitely some disadvantages that should be considered before jumping in. Here are five things to think about before getting a home loan.
- Immediate Long Term Debt
Once you are responsible for a home loan, you tie yourself to it for anywhere from 10 to 30 years. This means that you must make monthly payments on time no matter what or face consequences. Depending on your underwriter, this could cause severely damage your financial future.
- Potential Credit Damage
If for some reason you cannot make the payments on a home loan, you risk damaging your long term credit. There is a process that all underwriters follow when reporting to the major credit rating agencies, and it’s not very flexible. As such, if you cannot make payments, the hit on your credit is virtually assured.
There is very little lenience for those who miss payments. Your credit will suffer even if you miss for emergency situations, such as the loss of a job or a medical emergency. Keep this in mind before you agree to make payments every month for decades.
- Limited Mobility
If you rent an apartment, you can move somewhere else whenever you want. This is not the case if you take out a home loan. If you find that the neighborhood you’ve chosen is too loud or the house that you purchased has problems, you are still responsible for the monthly payments in full. Be very sure of the property that you are purchasing before taking out a home loan.
- Only Covers One Expense
Home loans are for the mortgage value. This does not furnish the house, nor does it take into account the ongoing maintenance costs that come with owning a home. If the plumbing breaks down, that could be thousands of dollars alongside the monthly payment. Many homeowners do not take this into account when they max out their financial abilities on the home loan itself.
- High Interest Rates
Depending on the type of home loan that you have, you could end up paying extraordinary interest rates. The terms of home loans are incredibly confusing for most laymen, and your underwriter has the ability to place you in bad financial straits if you don’t understand what you’re agreeing to.
Always consider the advice of trusted professionals in real estate and accounting before you commit yourself to a home loan. Although home loans are a common step to homeownership, they must be responsibly implemented to avoid regret later.
