TALLAHASSEE, FL -- Many people misunderstand or misrepresent the benefits of mortgages, and they get the key points wrong.
1. Your mortgage doesn’t affect your home’s value.
You’re buying your home because you think it will rise in value over time. (Admit it: If you were certain it would fall in value, you wouldn’t buy it — you’d rent instead. In fact, your home’s value will rise and fall many times during the next 30 years — you just won’t get monthly statements showing you how it’s doing.) Yet, the eventual rise (or fall) in value will occur whether you have a mortgage or not. So go ahead and get a mortgage: Your house’s value will be unaffected.
2. A mortgage won’t stop you from building equity in the house.
Everyone wants to build equity. It’s the main financial reason for owning a house. You can use the equity to help pay for college, weddings, and even retirement. Mortgages are bad, many people say, because the bigger the mortgage, the lower your equity.
3. A mortgage is cheap money.
Mortgages, in fact, are the cheapest money you will ever be able to borrow. (Oh, sure, you can get a credit card that offers 0% interest for six months, but try to borrow a couple hundred thousand for 30 years that way.)
4. Mortgages allow you to sell without selling.
Have you noticed that your home is worth much more than it was 10 years ago?
You might be worried that your home’s value will fall. If you’re afraid that your home’s value might decline, you should sell the house before that happens. But you don’t want to do that! It’s your home, after all. You have roots in the community. Uproot the kids? And where would you move? No, selling is not a practical idea.
Still, you fret that your home’s equity is at risk. Can you protect it without having to sell? Yes! Simply get a new mortgage, and pull the equity out of the house. It’s the same thing as selling, except that you don’t have to sell!
