Mortgages are the cheapest available credit for your home. Although they may sound lucrative, they may not be attractive for a few reasons and may not fit all borrowers. Below are a few examples of people and situations where mortgages are less attractive:
Temporary Workers
If you do not have a visibility of continuous employment you need to stay away from a mortgage (and maybe even considering not buying a home). You would be better off renting a home rather than buying one and taking mortgage. This is also true for migrant workers on work visas and have a finite defined visibility on their stay in the country they are planning to purchase a home and take a mortgage.
Uncontrollable & Heavily Leveraged Spenders
If you do not have a good financial prudence or are highly leveraged (i.e., have amassed a large debt by using rolling credit and other loans), you would be better off staying off mortgages as these require dedicated long-term commitments. Usually, if you fall into this category then your credit score may be lower, and the mortgage would have a higher interest rate. This will prove to be a double whammy as the monthly costs increase.
Ambitious Home Buyers
When a lender does a pre-qualification for you, they consider only minimum payments due on your credit cards as expenses and subtract that from your income to determine your loan payment capability. This will let them pre-qualify you for a higher mortgage amount than what you can really afford. Sometimes, this will lead to a debt trap if not managed properly. Higher approval would put you under an illusion to buy a more expensive home. Your income levels would not justify the exorbitant cost.
Hyper Optimists
You may be expecting a huge promotion or a better job in the future and will bet on the 2 birds in the bush to decide. If these things do not materialize then you will soon be in for an unpleasant surprise. You were already spread very thin on your payment capacity and now it will only get worse. The best mantra that you need to remember is plan for the worse and strive for the best. Your plan needs to be viable even in the worst possible conditions and there needs to be clearly stated risks and their potential mitigations. Writing things down will be very helpful.
Variable Income Sources
Another thing to be careful of is if your income varies drastically at different periods. You can still take a mortgage but will need to have a better contingency plan and associated funds in place to cover a rainy day. For such cases, a line of credit will be a better option compared to a mortgage.
