Home Loan: Does this scare you? Is it because of the liability and the commitment? What if you fail to make payments on time? What if it hampers your credibility? Well, these are important concerns, but there is more to it than just this. There are times when you need to do a cost benefit analysis of the situation to come up with something that will do you good in future. As far as the liability, commitment and defaulting is concerned, the one solution to all of it is ‘planning’. After all, the many benefits of a home loan outweigh these trivial concerns.
Some of the most crucial benefits of a home loan are listed below.
- The option of changing your lender: There will be instances when you will notice a lender offering a lower interest rate as compared to your current one. Home loan gives you an option to switch the lender. Though the commitment remains constant, the costs incurred by you reduce.
- The liability changes into an asset: Though you are liable to pay your EMIs on time for a specific period, once your tenure is complete your liability turns into an asset. You will have bigger needs in future, and your illiquid asset, your house, can be used to avail additional loans. Loans granted against property has lower rate of interest, as well.
- Joint Home Loan Benefit: In case of a joint loan, each person can claim a deduction of interest amounting to Rs. 2 lakhs each and principal repayment amounting up to Rs. 1.5 lakhs each, in their ITR.
- Property assessment: A bank, before granting you the loan, will definitely do a background check of the property. They will do an inspection on whether the property has any disputes pending and whether it is legally sound. It is obvious, that you, providing the proof of the abovementioned criterions will be easier for the bank, but if you are in a hurry and do not want to do it by yourself, availing a home loan will do it for you.
- Home loans come with tax benefits: One of the major reasons as to why you must opt for a home loan is the basket of tax benefits it gets with itself. In case you miss an EMI, you can still get the tax benefit on the interest paid. Not only that, the processing fee is tax deductible and the benefit of principal repayment tax can be reversed if you sell the property within 5 years. You will get an interest deduction on the total amount you have raised to either construct or purchase a property and this is also applicable to the repair and reconstruction of the current property.
- First time buyer benefits: For those who are buying a house for the first time, you are entitled to additional deductions of up to Rs. 50,000. This is applicable for loans of Rs. 35 lakh or less and property not exceeding Rs. 50 lakh in value terms.
The points discussed above testify the definite advantage of home loans. Not only does it help you plan your finances strategically, but also keeps you stress-free when it comes to repaying your loan in easy monthly instalments.