Ways in which your home loan benefits you

Ways in which your home loan benefits you

We list the ways in which your home loan can give you tax savings, improve your credit score and benefit you over the long run.

home loan

Is there any person in the world who does not yearn to own their own house? Your home is your sanctuary against the world, a place where you can relax and be your true self. But buying a house remains a pipe dream for most people, especially those who wait for years to cobble together the finances to buy a house. The current state of Indian realty is such that a home loan seems to be the only viable solution for most people looking to buy a house.

Borrowing a home loan is simple enough when you partner with a leading bank. The bank can offer you a competitive rate of interest, flexible repayment terms, chance to effect a loan transfer and also an easy online application process.

Most first time home loan applicants are aware of only a few facts about this category of loans[1]. They fear the monthly EMI payment schedule and whether it will impact their budget. However, this worry is offset by the several benefits that a home loan offers, such as[2]

* It finances your home purchase dream.

You have dreamed of owning your own house for so long. Now that you are taking a home loan, you can finally realise this long-standing dream. Leading banks in India offer home loans to eligible customers in an easy, sometimes paperless manner. You can apply for the loan online, and the entire application and approval process is completed online. You may need to go to the lender only to take charge of the loan documents and sign any paperwork before the loan is disbursed. After years of patient waiting, a home loan brings your dream home within reach[3].

* It offers tax benefits.

Another credible benefit of taking a home loan is that you get tax benefits on it[4]. The tax benefits are extended towards the principal borrowing under Sec 80C and on the interest paid under Sec 24B of the Income Tax Act, 1961. The benefit on interest payable is extended even for home loans taken to finance the purchase of a second home.

* You can extend the tenure for a lower EMI.

Those who hesitate to take a home loan because of the impending EMI payment schedule can take heart from knowing that certain parameters within the loan can be manipulated for their benefit. Use a home loan calculator to find the loan eligibility and monthly EMI outgo. You can increase the loan tenure to get a lower EMI – find out the difference using the home loan calculator[5]. Another way to reduce the EMI is to borrow a lower amount of money from the lending institution. However, the lower the amount of money that you borrow, the more you must pay from your own resources. Normally, most lenders offer up to 80% of the house’s value as a loan, while the remaining 20% must be paid from your own resources.

* You can transfer the loan to another lender for lower interest.

Another way to get reduced EMI is to effect a balance amount transfer to another lender, where the latter offers a lower rate of interest[6]. You can do the loan transfer after checking with your current lender’s rate of interest. If their lowest offer is still higher than that of another lender, then it is better to transfer the loan to the other lender. Doing so helps you avail of a lower rate of interest, and hence, a lower EMI. The overall money that you repay the lending institution also reduces. Do use a home loan calculator to find out how much difference the transfer would make. Also, find out the transfer fees that the second lender charges.

* You are not charged prepayment charges.

The home loan is the only loan product in India that does not attract foreclosure charges. You can pre-pay the loan much before its tenure, and you can also periodically repay larger sums of money to close the loan faster. Both do not attract prepayment charges.

Thus, taking a home loan offers several benefits that are not immediately apparent. Most importantly, it saves a lot of money that you would otherwise spend on renting out a house for years. Rental money is never refunded to you once the lease expires. In contrast, the monthly EMIs you pay towards the home loan help you in securing your house, bit by bit!

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