Buying your own home is one of the biggest steps in your life. It combines emotions such as anxiety, frustration, and a sense of accomplishment. Additionally, with increasing property rates, it might be difficult to buy a home through your own investments and savings wholly. Most take the route of a home loan to buy a home. As a huge loan amount is included with the long loan tenure, the home loan comes as a liability for many. However, the availability of different benefits on home loans makes it the best thing for the borrowers that work in their favour. Listed here are major home loan advantages –
What is meant by a home loan?
A home loan is a credit option availed by borrowers to fund your dream home. With a home loan, you can borrow massive, big-ticket funds from financial institutions like Ummeed Housing Finance, Shubham Housing Finance, and others at a specific rate of interest, which must be paid back via EMIs for repayment tenures stretching up to thirty years. Remember that in the home loan, you are permitted to borrow finance of up to 90 per cent of the value or property depending on the loan proceeds. The rest amount must be funded by the borrower in the form of down payment funds.
As a home loan by nature is secured, the home you purchase through a loan is availed as security by the financial institution. In events of repetitive default on EMI, lenders might recover the loan proceeds through property or home sale.
What are the top advantages of a home loan?
Tax benefit –
One of the important benefits of a Ummeed Housing Finance, Shubham Housing Finance is the income tax deduction that you get on your principal or interest repayments. You can get up to Rs 2 lakh on the interest repayment as per Section 24 B and up to Rs 1.50 lakh on the principal amount according to Section 80 C.
Availability of lower rate of interest –
Home loans, as they are secured in nature, are available at a lower interest rate starting from only 7 per cent p.a. onwards.
Availability of higher loan repayment tenure –
Dissimilar to many other credit options, a home loan is a big-ticket option available at longer tenures that go as high as 30 years. Owing to the availability of higher repayment tenure, you can select your loan tenure based on your repayment capacity.
Do not charge prepayment charges in the scenario of the floating rate option –
As the Reserve Bank of India has strictly not allowed all the lenders to levy prepayment or foreclosure fees on loan floating interest rates, home loans availed at floating rates do not have any foreclosure or prepayment fees. Many lenders that offer fixed interest rate home loans might ask for a foreclosure or prepayment fees on loan.
Can choose to top up home loan to mitigate your financial mismatches or emergencies –
Just the existing home loan applicants are eligible to go for a top-up home loan. Note that such loans are the same as a personal loan where you can use the loan amount to meet your various big-ticket expenditures like car purchase, children’s higher education, home amelioration or renovation plan, personal travel, medical expenditures and others. Thus, there is no restriction on the fund usage of top-up loans except if proceeds are utilized for any purpose, which is speculative. The presence of zero restriction on fund usage via top-up home loans makes this credit choice an alternative to personal loans and credit card loans.
Also, note that such loan types come with lower interest rates, which might be a little higher than underlying home loan interest rates with a higher repayment period, which is dependent on the underlying home loan’s remaining repayment period. Availability of lower interest rates and higher repayment loan tenure makes the top-up option the cheapest that is available to the existing borrowers of the home loan than other alternatives like personal loans or credit card loans.
What’s the most popular tax benefit on home loans?
A home loan is one of the major tax-saving credit choices due to the availability of different tax deductions according to Section 80 C, 80 EEA, and 24 b of the income tax Act. An eligible home loan borrower can claim the overall deduction on the tax of around up to Rs 5 lakh, where Rs 1.5 lakh deduction is permitted on the principal repayment according to Section 80 C, and Rs 2 lakh is permitted on loan interest constituent according to Section 24b, and Rs 1.50 lakh tax deduction is permitted on loan interest constituent according to Section 80 EEA if you meet the required eligibility parameter.
When must you purchase a home using your own funds?
Due to the increasing property and housing pricing, owning a house by repaying the whole amount is impossible for many. As a result, you can go for the home loan option to not only meet your dream home earlier but even make the most out of your available home loan advantages.
Big ticket loans clubbed with long-term repayment periods available on home loans lead to long-term repayment commitment for you. Lenders also need you to finance from your pocket a considerable proportion of the thorough home purchasing or construction amount. Additionally, lenders also review your repayment capacity when assessing your home loan application. All these parameters need you, as a prospective applicant for a home loan, to assess your financial preparedness before placing the application for a home loan. One such crucial parameter to consider in your financial preparedness is to form a substantial corpus for repayment of home loan down payment.
As the Reserve Bank of India has permitted you to finance up to 90 per cent of the property cost via a home loan, you as an applicant for the home must contribute towards the rest of the property cost from your own pocket as a down payment or margin contribution. Try to contribute as high an amount as possible; doing so would boost the lender’s confidence in you, and thus, your eligibility for a home loan would enhance.