Owning a home is the first step towards achieving the great Nigerian dream. Today, obtaining a home loan is essential if you want to buy the house of your dreams. In the most expensive cities, it is impossible to buy a home with all of your money due to escalating prices. But other people believe getting a mortgage has drawbacks. Is that so? Let’s explore some of the advantages and disadvantages of taking out a mortgage.
Benefits of a home loan
While making EMI payments on a monthly basis may cause some stress, home loans do provide several important advantages.
You become a proud homeowner initially thanks to home financing. That is correct, I agree. Property loans make it possible for you to buy a home. It is impossible to purchase a home with one’s own cash due to the rising costs of land and construction supplies. Home loans give you the option to borrow funds at a much lower cost and create an asset instead of taking out more expensive loan financing.
Second, paying down a mortgage has tax advantages. You may deduct up to N1,000,000 of the interest component of your annual EMI payments from your gross income. In addition, there is a deduction for interest paid on a mortgage during the pre-construction phase. Additionally, a deduction for the principal portion of the EMI paid during the year is permitted, up to a maximum of N800,000 In addition to that, there are deductions for registration fees and stamp duty.
Thirdly, you can reduce your rent costs by getting a home loan. Despite the fact that many people would rather pay rent than own a home, owning a home saves money. Renting implies financial loss because you do not own something. Additionally, renting requires yearly rent increases that are frequently larger than inflation. In 15-20 years, one can easily acquire the same kind of home rather than continuing to pay rising rent.
Things to consider before obtaining a mortgage
Home loans may be necessary in the modern world, but that doesn’t mean they are without risk.
First of all, housing loans come with lengthy payments commitments. A home loan is often a 10–20 year commitment, unlike a personal loan, which you can repay in as little as one to two years. This means that you must practice tremendous discipline and make on-time EMI payments for a continuous period of 120 to 240 months.
Second, if you default on your mortgage payments, you do not become the full owner of the property. The bank or financial institution will be free to pursue any available legal remedies if you don’t make payments. In the worst-case scenario, this could result in your eviction from the house and the bank gaining ownership.
Thirdly, having a mortgage may make you less frugal. A home loan EMI is a duty for those who enjoy spending money and frequently travel abroad or domestically. Their budget will need to be more efficient because they will always utilize a portion of their income to pay their EMIs.