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A mortgage is a loan that is secured by a real estate property you are buying. Most mortgages are long-term investments and they have both positive and negative therefore you should think carefully before requesting one. In this article, I will help you understand the negative side of mortgages and why they may be a bad option for homebuyers.
Risk of Losing Collateral/Value depreciation
This is the greatest reason why you should be hesitant about mortgages. The house is used as collateral and it’s the one that guarantees the lender that you will pay their loan. Nevertheless, in case you stop paying the loan for whichever reason, the lender has the right to repossess it. This means you will lose the money you will have paid up to the time of repossession.
The other downside of a mortgage is that the property may lose its value over time. Many factors can lead to the loss of a property’s value and some of them may be beyond your control. Sadly, even if your house loses its value, the amount of the mortgage will not change. This means you may end up with a loan that is greater than your house’s value.
In addition to the mortgage interest you pay, you may end up catering for other costs. They include the conveyance fee, valuation cost, and remortgaging fee. Depending on your lender and the type of mortgage, these costs at times might be very high.
A mortgage is a debt that you will have to pay for a long time. Once you take one, you commit yourself to pay it back with a lot of money within an agreed time frame. You can pay this loan even for over 25 years and at the lapse of that period, you will have paid more than what you borrowed.
This burden can also have an impact on your family unless you were well prepared financially. You may have to compromise on your living standards by cutting down some expenditures and this might not be easy for your loved ones.
Since most mortgages take a long time to repay, they might be a bad financial decision. You may not be able to take another major loan until the day you finish paying the mortgage. This can be inconvenient especially if an emergency happens because you will not access funds. You will have to maneuver other ways to sort your financial problems. In short, a mortgage keeps you in financial bondage.
In conclusion, as much as a home is important, you need to reconsider before taking a mortgage. You may risk losing the house if you stop repaying it or its value can go down. Also, a mortgage is a long-term debt that might affect your financial life for a long time. It is therefore advisable to make an informed decision before requesting one.
Denver Real Estate
specializes in Propery Kenya. We are among the best companies in Nairobi. Our customers undertake land search Kenya before purchasing property with us. To get more information contact us 0701 730 267.