The Pros and Cons of a Mortgage

mortgageA mortgage is a long term commitment in the form of an agreement that is signed between the two parties who are the buyer and the seller of the home. Now there are a number of advantages and disadvantages associated with the mortgage that comes to an individual

Now first lest us talk about the several advantages that the mortgages come with-

  1. Cost effective borrowing

This is one of the benefits of the mortgage which is that the interest rates of the mortgage are usually lower when it is compared to those of the other types of loan borrowings.

  1. Tailored borrowing

While going for mortgage you get a variety of options to choose from. There are various choices of mortgage types like the tracker, fixed rate, variable rate or discount mortgages. Thus you get more number of choices of finding the right kind of mortgage deal for you.

  1. Longer term mortgage

Now days, instead of the 25 years mortgage one can choose the 30 year mortgages. This way the cost of the house purchase is spread over a longer time period. This in turn means that you have you pay less for your monthly payments.

  1. As an investment

Mortgages can be considered as long term investment. This means that when you pay mortgage that is something that you will eventually owe one day. It’s more like renting an equivalent property while you are outgoing on a mortgage.

Now let us talk about the several disadvantages that it has-

  1. Debt

Taking out a mortgage means taking on debt. You are going to borrow money in the form of loans. Now sine loan always come with some interest rates, when you are buying something on mortgage you promise to return that money along with the interest added. This way you will end up some extra money that what you borrowed initially.

  1. Secured loans

This is yet another major problem. That if the person who is dealing with a mortgage isn’t able to keep up with the loans may eventually lose their homes. This is mainly because the mortgage is secured against that property which is being bought.

  1. Additional fees, charges, add-ons

Mortgages come with some extra cost as well. For example valuations fees which may include additional fees lie charges, add-ons etc. when all of these are added together, it can add up to a significant amount of money. 

  1. Potential foreclosure

For situations in which you get caught up in an unexpected financial crisis, and are not able to pay for your loans, may end up facing face foreclosure. Now although there are a few lends would still work with you to ward off this situation, there are theirs who would take legal action against you.

Conclusion

Thus the mortgage comes with several pros and cons. And it depends entirely on the person and their financial station whether they want to go for it or not.

How ULIPs can Help you Save for the Long Term

Save more moneyULIP stands for the unit linked insurance plan.  It is a tool generally considered to be great for the wealth creating. It is considered to be good for long terms due to the diversity that is offered in the funds. It is quite ideal for people who want to start at younger age so that they can have the equity advantage in the long run. also the guidelines issued by the New Insurance Regulatory and Development Authority of India, have made these ULIPs even more investor friendly as compared to the time when they were initially introduced.

There is several ways in which the ULIPs can save you from the long term plans. These are as follows-

Lock in period

They come with a five year lock in period which makes you habituated to indiscipline investing. This policy can be bight once and it helps because it is a long term plan. Also with the help of this, one can avail the tax benefits every year till the paying term of the premium ends. Also the lock in is calculated since the day the data policy is issued.  One can either choose to pay the premiums on a monthly basis or sometimes annually.

Potentially better return

Also the ULIPs give better returns as compared to any other insurance products. This is due to the equity advantage which is because the ULIPs invest the premium that is used by people in different assists and different funds. The tax savings are taken care of by the renewals. Also depending on the performance of the equity, the maturity amount varies for a given tenure.  And also the maturity amount may become at free in cases of tax efficiency.

Flexibility

ULIPs are considered to be very flexible.  One is allowed to switch between the funds during the term of the policy.  A person also gets to choose between equity, growth, balanced, income etc. they are also allowed to change the fund at any point of time.  Also here one deed not need to monitor the companies in which the funds are invested unlike the shares in which it is necessary to keep track of it.

Dual advantage

The ULIPs come with dual advantage. They provide unto INR 1.5 lakhs of tax advantage under the section 80 C of the income tax act 1961. And it also offers a minimum amount of sum that can be insured. Its value is equal to near about 10 times of the annual premium for all of those investors who are under the age of 45. And this is not the case with the term insurance plans.

Conclusion

Thus with so many advantages that are being offered by the ULIP, it can act as a great opportunity for the creation of wealth. With the ULIP become more investor friendly more and more people have been taking interest in this in the recent time.