Six Reasons to Get a Long-Term Mortgage

As much as home ownership is the American Dream, owing money on a home loan is perceived by many as the American Nightmare. Yet, despite the thousands of dollars you'll spend on interest payments, there are some benefits to a long-term mortgage.

Debt can be depressing, especially when you have a hefty mortgage payment. Many people feel weighed down by monthly payments to a mortgage lender. But there's plenty of evidence that the benefits of a holding a long-term fixed-rate mortgage-such as low mortgage rates and tax-deductible interest-make it a great financial tool.

1. Low mortgage rates

The double-digit interest rates of the 1970s are a distant memory for most homeowners. Today's single-digit mortgage rates, when compared with the interest charged on a credit card or a personal loan, make a home loan the cheapest available money on the market.

2. Tax-deductible interest

As part of the federal government's initiative to increase the rates of homeownership, interest on mortgage payments is tax deductible. The net effect of the deduction is the equivalent to lowering your rate a percentage point or two (based on your tax bracket). The tax-deductible interest rate makes your mortgage dollars even cheaper, which leaves you with more money for investing.

3. Spend more on the market

Just like term life insurance champions the mentality "Buy term and invest the difference," you can take a similar approach to your mortgage. Instead of taking out an expensive 15-year mortgage, get a 30-year mortgage and invest the difference in mutual funds, stocks, or bonds. Over time, compound interest should help your investment overtake the money spent on long-term interest.

4. Your home will appreciate in value

Provided that you live in a good neighborhood with a stable economy, your home should appreciate in value in time. Even minimal percentage gains over time will outpace the cost of your mortgage, further lowering the overall expense of the loan.

5. Mortgage payments static, salaries rise

The best part about a fixed-rate mortgage is that the payment will always stay the same. If you collect annual raises, your salary will consistently increase, making the payments increasingly affordable.

6. Increased liquidity

Liquidity is extremely important for any individual or family; if times get tough, you always want to be able to access cash in a pinch. If you prepay your mortgage and build up equity, you'll have to take out a loan to access it (or else sell your house). On the other hand, if you had invested that money, you could simply cash in your investments.

Debt conjures up all types of negative connotations, but the right kind of debt can be an excellent financial tool. A long-term mortgage at a low interest rate could give you the flexibility you need to invest for your retirement, or have access to emergency cash. Spend less on your mortgage, and you'll save more over the long haul.