A mortgage is a long-term loan that allows you to buy a house without having to pay everything right away. In practice, the bank or credit institution disburses a sum of money equal to the value of the property, which must be repaid with interest over the years.
The main advantage of a mortgage is the ability to buy a home without having to pay everything all at once.
Furthermore, the mortgage allows you to benefit from certain tax breaks , such as the deduction of interest expense from income tax. This means that a portion of the interest paid each year can be deducted from your tax return, reducing your tax payable.
However, taking out a mortgage to buy a house also has its cons
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The main disadvantage of the mortgage is that you pay more than the value of the property because of the interest. In addition, the bank requires guarantees to grant the loan, such as the stipulation of a life insurance policy and the presentation of a surety.
Furthermore, the mortgage implies the tie-up of a large part of the income for many years , up to 30 or even 40 years. This means that for many years most of the income will be spent on paying off the loan, limiting the possibility of investing in other projects.
Buying a house without taking out a mortgage: pros
Buying a property without using a mortgage is an option for those who have saved enough money to be able to pay it all off at once. The main advantage of paying without a mortgage is that you pay no interest, so the total cost of the purchase is lower than using the mortgage.
Furthermore, buying without a mortgage does not require guarantees or insurance policies, and does not bind income for many years. This means that you have more freedom to invest and choose in the future.
The main disadvantage of buying a property without a mortgage is that you need to have a considerable amount of money on hand. In addition, it may involve some additional costs, such as the payment of taxes and fees on the sale of the property.