Buying a home is a big-ticket purchase and requires a significant amount of capital. It is also a superior and stable investment option that can provide returns in various ways. Having said that, in today’s time and age where Home Loans are available at ease, there would barely be a numbered few people who would utilise all their savings to buy a property. Even those who have the kind of cash with them, prefer to get a loan for at least a part of the property value, to avail of its various benefits. Let us discuss a few of them in detail.
It is always a wise move to keep some money aside for the vagaries of life. It could be an unexpected expense or an anticipated one – liquid cash can always find its purpose. You may also put the cash at hand in other growth avenues such as mutual funds or deposits - such that it does not sit idle and can also be withdrawn easily whenever required.
Investing in a House requires years of savings – reciprocating to this fact, the govt. of India has provided several tax benefits to those who avail a housing loan.
Deduction on Principal repayment: For a completed property you can avail a deduction of up to Rs.1.5 Lakh on principal portion per financial year.
Deduction on stamp duty and registration fees: Up to Rs.1.5 Lakh in the year of expense incurred. Note that you can claim this deduction regardless of a Home Loan.
Deduction on Interest repayment: Borrower can save up to Rs. 2 Lakh in interest payment made toward loan borrowed for purchasing, constructing a new house, or renovating or repairing an existing home.
This limit is reduced to Rs.30,000 in case the loan was borrowed before 1st April 1999 or if the construction is not completed within 5 years of borrowing the loan.
Savings under section 80EEA
Deduction of Rs.50,000: First-time homeowners who have availed of a Home Loan can claim a deduction of Rs.50,000 over the maximum deduction of Rs.1.5 Lakh provided they qualify for the eligibility criteria as mentioned under section 80EEA.
A credit score is based on credit report which comprises of credit history. Having a Home Loan and paying timely EMIs is the best way to create a solid credit history. When the amount involved in significant and your repayments are on time, this translates to a responsible credit handling behaviour and indicates high creditworthiness. So next time when you are again in the need of a loan or are looking for a balance transfer, your good credit score can fetch you better deals that includes lowest housing loan interest rates and higher loan amounts.
Home Loans come with a long repayment tenor, often spanning a duration of 30 years or so. With such a long time on hands, you can conveniently make the repayments without letting your daily life getting drastically affected. In fact, the loan extension process is such that your maximum repayment capacity and loan amount is calculated right at the time of extending the loan to you. The amount calculated is such that it does not overburden you with your current income profile. You can also check your own EMIs for the loan amount you are looking for using the online home loan EMI calculator. With a long enough tenor and a manageable loan EMI amount, you can handle your finances better and have a disciplined yet comfortable repayment journey.
When you are getting a loan and are in a good position to bag a higher loan amount, you have more options opened for you. Compare this to buying a home with the limited funds that you have accumulated from saving where you can have only limited options to explore from. Sometimes, the difference between your dream home and the home you must settle for is only a few lakhs. These few lakhs can very well be arranged by the Home Loan money.
Not only that, with the facility of a Top-up Loan that comes with a Home Loan, you can access additional funds to renovate your newly purchased property or make structural or aesthetic updates to it. If you are left with money, you can fund your other major expenses with only a minor rise in your EMI.
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