If you are considering owning a home, taking a mortgage loan is an alternative to outright purchase given that the later enhances your cashflow which can be channeled to profitable investments. This is possible because the cost of buying a home is spread out over an extended period, hence, you can allocate your income towards other opportunities and investments.
Monthly Mortgage Payments vs. Outright Purchase:
When you buy a home outright with cash, your entire investment is tied up in one property, leaving you with limited liquidity for other investments. However, with a mortgage, you can make smaller monthly payments over an extended period, freeing up your available income for other purposes. This allows you to diversify your investment portfolio and take advantage of additional financial opportunities.
For example, let’s say you have ₦10,000,000 to purchase a home. Instead of using the entire amount to buy a property, you could make a down payment of ₦3,000,000 and take out a mortgage for the ₦7,000,000 balance. By opting for a mortgage, you still have ₦7,000,000 of your funds available for other investments such as starting a business, investing in stocks, mutual funds, voluntary contribution to your retirement savings account etc.
Leveraging Real Estate Investments:
Over the years, the importance of real estate as a valuable investment asset has grown significantly. By using a mortgage to purchase a property, you can leverage the potential returns of real estate without tying up all your capital. For instance, if you purchase a property worth ₦20,000,000 with a mortgage and the property appreciates by 10% within one year, your investment will be worth ₦22,000,000. This means that your return on investment is based on the total value of the property, not just the amount you initially invested.
Cash Flow for Other Investments:
When you opt for a mortgage, you have the opportunity to generate additional cash flow that can be directed towards other investments. Instead of using a significant portion of your income to cover the full cost of homeownership, you can allocate a portion of it towards monthly mortgage payments. This leaves you with more disposable income to invest in other ventures that align with your financial goals.
For example, suppose your monthly income is ₦500,000, and your mortgage payment is ₦100,000. By using a mortgage, you have a balance of ₦400,000 per month from which you can invest in various financial instruments, which could potentially yield higher returns over time.
Tax Advantages:
In Nigeria, there are tax benefits associated with mortgage interest payments. By deducting the interest portion of your mortgage payment from your taxable income, you can reduce your overall tax liability. This frees up additional funds that can be utilized for investments or other financial goals.
In conclusion, using a mortgage to purchase a home helps you manage your disposable income, allowing you to allocate funds towards other investments. By leveraging a mortgage, you have the opportunity to diversify your investment portfolio, take advantage of potential real estate appreciation, generate cash flow for other ventures, and benefit from tax advantages.
Contact us today at 0908 762 8273 or email us at info@nmrc.com.ng for guidance.
