Benefits of Home Loan
What is a Home Loan?
A home loan is a loan amount that is taken from a lender, usually a bank or a NBFC, to purchase a home.
Home loan is a secured type of loan where the purchased home is kept as collateral with the lender bank or NBFC until the loan amount is paid back. The loan amount is repaid by paying interests that can be of either a fixed rate or floating rate, depending on your choice.
How to get a Home Loan easily?
A owned house is a dream for most of the individuals residing in metros and big cities. But when it comes to Home Loans, you need to check a lot of things before you actually apply for the Home Loan because you do not want your home loan application to be rejected.
Here are a few check pointers before you prepare to apply for a home loan, which will make your home loan processing easy and smooth.
- Identify your budget
- Identify the area where you want to buy a house
- Identify the property or builder
- Check your eligibility before applying for the loan
- Check your credit score using Eligibility calculators available online.
- Check various banks interest rates and compare the loan details from various banks
- Get proper consultancy for Home Loan to identify various hidden charges, processing fees, terms and conditions etc by banks.
Benefits of Home Loan?
While considering opting for a home loan, there might be several questions in your mind that whether this is a correct decision, a huge part of my income would go into loan repayments, what about the property value, what if I decide to quit might property in between, etc.
Here are some of the benefits that come with a home loan, that may help you make your decision about whether to take a home loan or not.
- Cheaper than other loans
- Tax Benefit
- Option to get Refinanced
- Long Tenures
- Asset that never depreciates
- Build a permanent asset and save Rent
- Government Policies and Preferred Condition
Home Loan is Cheaper than other loans
When considering other kinds of loans available in the market, home loans are the cheapest loans available. Also, it comes with various preferred options that help you make it cheaper over time.
Like you can make surplus payments towards your home loan amount whenever you have extra money.
This tends to reduce your principal amount on which mostly your interest is calculated.
Thus, by making a surplus payment you reduce the overall cost of your home loan.
This tends to reduce with the increasing frequency of your prepayments like weekly, biweekly, fortnightly and bi-monthly.
You can choose any one option to reduce the overall cost of your loan amount. Unlike other loans, you don’t have to pay any penalty for making a prepayment in terms of your home loan. However, it is advised to confirm this option from your lender before entering into the loan agreement.
You avail tax benefits on your home loan principal and interest
Preferable policies for first home buyers by governments As per Income Tax Act, 1961 provision announced in budget 2019.
A home buyer can avail a tax benefit under section 24, section 80C and Section 80EE on both principal amount of his home loan and also interest amount of his home loan, In case there are two joint applicants for home loan then both of them can apply for these tax rebates separately.
As per Section 24, one can have a tax deduction of 2 lakh rupees for interest being paid on his home loan for a self-occupied property.
However, to avail this tax deduction, one must have got the possession letter of his house.
Next, under section 80C, an individual could apply for a tax deduction of 1.5 lakhs on the principal amount for his home loan amount which would also include his registration cost and stamp duty cost.
Then under section 80EE, an additional tax deduction of INR 50,000 is applicable for first time home buyers. Low-interest rates for women applicants
Option to get refinanced
Whatever may be home loan terms while you were buying a house, you always have an option to get it refinanced, If the loan interest rates drop due to various fiscal policies over the loan term.
Refinancing is a blessing for home loan owners, as it allows one to tap favorable market condition over the time period and also helps by reducing repayment burden by changing other loan terms like increasing the repayment duration etc.
Home Loan comes with long payment tenures
This is the only loan that comes with a loan tenure of 30 years for repayment.
Also, one can further increase this tenure by getting his or her home loan refinanced. You don’t have to make an enquiry to know your EMI amount, there are several online Home loan EMI calculators available to help you calculate the home loan EMIs and help you in your decision.
These calculators can very well help you calculate your monthly repayment burden and how it changes by changing the tenure and available interest rates.
You possess an asset that never depreciates
House is the only asset that will never depreciate in its value. Though while making a financial decision, you may like to see likely return on that property over time but then the value of your house will never depreciate from its basic price.
This is because a housing location is under constant development both from government initiative and by the efforts from the locales as the place gets more and more individuals residing in the place.
Hence with these ever-increasing development of the place and the surroundings, the house price is always increasing.\
Save your money on paying out rent to build a permanent asset
When you payout a certain amount of money as rent, then you just pay your living cost and you don’t tend to gain anything in return. However, over time through your home loan repayments, you are building a permanent asset, that is your house. This could be a future investment, which you could sell and buy a different and more prefer house as you need increases and your financial viability improves.
Your rent amount is always increasing with increasing inflation rates however there are various government policies that help you with favorable home loan interest rates and make your buying decision cheaper than renting it out.
Preferred conditions on Home loan for First Time Buyers
Government of India have enabled various policies to favor people to own their own house. One of them is Pradhan Mantri Awas Yojna, which tends to get you subsidy in your first purchase per your income slab.
Then there are also lower interest rates for women applicants. So if you apply for the home loan with your wife, then you could enjoy these lower interest rates on your home loans.