Mortgages are a mainstay of home ownership. A mortgage enables a home buyer to increase his standard of living today based on his expected future income. The loan is paid back in monthly installments, and interest is charged on the loan balance until it is paid off. However, if the mortgagee is unable to pay the installments, the bank might force him to liquidate the property at a price below the its market value. A number of risks are associated with mortgages, from the view point of a consumer.
Uncertainty of Expected Future Income
Your future earnings are uncertain. During the term of the mortgage, you may find yourself unable to make payments and at risk of defaulting on the loan. Once you've lived in your own home, it can be difficult to reduce your standard of living by moving into an apartment. Rather than risk this, some people prefer to rent until their income rises and they can pay cash for a home.
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