High real estate prices make it difficult for many to buy their dream home but home loan it easy by funding up to 80% of the cost of the property. Home loan is a loan that is extended to an individual to buy a house. The property is mortgaged with the bank or non-banking financial institution till the repayment of the loan. The lender will hold the tittle deed of the house till the housing loan amount is repaid in full along with the due interest in time. The home loan can not only be taken for the purchase of the property but also the construction or renovation of the house.
Benefits of a home loan
1. Tax benefits on home loan
To encourage more and more people buy their own house, government of India provides tax deduction on the principal as well as interest paid on home loan. An individual is eligible to claim a deduction of up to Rs 1.5 lakh under Section 80C of Income Tax of India 1971 Act in a financial year. While a deduction of up to Rs 2 lakh is allowed on the interest portion under Section 24B of Income Tax of India Act. The deductions under income tax are only available after the construction of the house is complete. You can’t claim the income tax deductions while the property is under construction. Read: to know more about home loan deductions.
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2. Tax benefits on second house:
In case of second house, you are eligible to claim deduction for the entire amount of housing loan interest paid under Section 24B of Income Tax Act.
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3. No prepayment charges:
Unlike other loans where lenders charge prepayment penalties on payment made towards home loan , there are no prepayment penalties on floating rate home loans . So, whenever you have surplus money, you can utilize it for making part payment towards your home loan and lower your burden. However, there will be prepayment charges in case of floating rate home loan.
4. Balance Transfer Facility:
In case of home loan you have the facility to transfer your home loan to different lender if he is giving you loan at a lower interest rate.
5. Makes it easy to buy dream home:
For many people buying house with own money is not possible, home loan as it can be repaid in easy monthly installments makes it easier to buy a house.
6. High repayment Tenure:
Among all types of home loan, It has the longest repayment tenure which goes up to 30 years, so one can reduce the burden of equated monthly installments by extending the tenure. Use our house loan EMI calculator to know how EMI change as you change your home loan tenure
7. Enjoy capital appreciation:
You will also benefit from the rise in prices of the property over time.
8. Saves you from paying rent:
As rent in metro cities is quite high they put strain on your monthly budget. It is better to pay the EMIs and own a house.