Does a mortgage pay off?

I have always wondered if it is better to invest your own resources or to take a mortgage when buying a flat or renovating and improving your own housing. In other words, to use “foreign resources.”

Of course, everything is a matter of opinion, and each of us can have a different view. Some of us see the mortgage loan as a big commitment, and would rather not have it. Twenty or thirty years is quite a long time for us to sleep peacefully and not to think about what will be a couple of years away, and whether we will be able to earn enough to repay the mortgage. However, some people prefer to take a mortgage loan even though they could buy the property with their own resources.

Let’s look into it.
If I had to save up for a flat or another property, it would probably take a very, very long time. And even if I decided right now to start saving some money in a piggy bank or in a savings account, I would not be able to save up for a normal flat, not even in 20 years, even though I would be putting aside the same amount as I would spend to repay the loan.

On the one hand, it is necessary to realize that every year we are attacked by, and our savings are slowly eaten by, the well-known to all, inflation. That means that even if I worked hard and really saved one million, in a few years that million would be gnawed away by inflation on each side. And today, a million means a million to us, but in a few years it would actually mean nothing.

The other side of the coin is the real estate price, which also has a rising tendency in the long run (which is undoubtedly the impact of the above-mentioned inflation). We could buy something for one million in the past, but today, the same million is no longer enough for us. To save up this way for your own living is an endless story and a slowly dissolving dream of your own home.

So, basically, it is time to think about the mortgage. The word “mortgage” probably commands respect in all of us. The first thing that comes to my mind when I hear the word “mortgage” are things that occur to everyone and shake their world.

It is an infinitely big commitment.
I’ll be repaying it all my life.
What if something happens to me and I will not be able to repay it?  Won’t I lose the roof over my head?
I’ll overpay a lot in interest, maybe even double.   

Even though a mortgage is a threat and a nightmare for us all, it certainly has its advantages. When we come to realize the words and reasons I mentioned – such as inflation and, at the same time, the increase in real estate prices, we will become good friends with the mortgage.

What do I mean?
As the real value of the saved million decreases as a result of inflation, the real value of the loan repayment also decreases. In other words – the installment will seem smaller and smaller to us, compared to other prices, although it has not changed at all. Perhaps, what scares us now, will be a negligible amount in the future.

Of course, when choosing a loan, you need to be aware of the amount of the provided interest rate. If the interest rate at least approximates the amount of inflation, then...
... but actually, you surely already know the answer to this question...