Why is it better to buy a home with a mortgage even if you can buy it off in full?
In: Economics
As others have said, it is not necessarily better for everyone.
Unlike other types of interest, like that from a savings account, mortgage interest is “amortized.” This means that in the first 10 years of a 30 year mortgage, pretty much *all* of your mortgage payments goes towards the interest you would have paid over the full 30 years. Because the bank wants their money sooner. Sell your house after 10 years, you’ll still owe the bank pretty much the same amount if you sold it after 2. If that sounds like a ripoff to you, you won’t hear me argue.
But! In exchange for paying your mortgage on a regular basis, your credit score goes up. Which means … banks will be more willing to loan you *even more money* in the future, because you’ve proven yourself a “good customer” for their interest collection services.
At my age and in my opinion, if I can buy anything without giving banks any more of my money, I will choose it.
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