Buying a home which you and your family can proudly call as your own is a life-time experience. It requires a lot of planning by family members about the exact necessities in a home and search for prospective homes and builders etc. Post these; you require finance to buy your dream home. This financing is popularly known as home loan.
– Home loan is a secured loan offered by a housing finance company or bank against the security of your house. Home Loan is offered to individuals who wish to purchase or construct a house. The property is mortgaged to the lender (housing finance company or bank) as a security till the loan is repaid along with interest. Normally, the loan is repaid through equal monthly instalments (EMIs).
– The amount of loan that can be borrowed typically depends on the repaying capacity of the customer, his income level (to ascertain how much EMI he can pay) and his credit score. Generally the maximum loan offered is up to 90% of the property cost provided rest of the conditions are fulfilled.
– The home loan interest rates for home loans are of two types - fixed rate or floating rate. Some lenders may offer partly fixed and/ or partly floating rate, depending on the needs of the borrower.
– The fixed home loan rates comes at a pre-specified interest rate for a fixed period, after which it is repayable at a floating rate
– In the case of a floating rate loan, the rate can vary throughout the loan tenure as it is tied to a reference interest rate which changes based on economic compulsions.
– There are various Income Tax benefits on a home loan and can be classified broadly into three parts –
When we talk about home loan we can think of only saving taxes. But there is more to it than saving taxes only.
– A home is a good investment as the price appreciates significantly and provides substantial return on your investments if you hold the property for long term. In fact, owing a property is much better than living in rent as the rent you pay can equal to the EMI to buy a home.
– Your home offers tremendous freedom to create the living environment that you have always dreamt of. You can paint rooms with choice of your colors, make floors with material that you wanted, own a pet or have your own garden etc.
– When you take a home loan and pay EMIs in time, it demonstrates to other lenders that you are a good borrower. This also enhances your credit score and therefore, when you need any other loans for buying a car, making improvements to your home or a personal or education loan, you get it very easily.
– When you pay monthly EMIs, a portion goes towards reducing the amount you owe as loan, and thus it increases your asset. In a sense, paying your EMIs is a form of saving as with each instalment payment your asset amount increases. With passage of time, the value of your home increases and thus increases the asset value further.
– When you have your home, you feel safe and secured. Your family can enjoy living in the home and lead a stress free life. You are free from the tension of changing homes or increase in rent or landlord’s threat to leave the rented house.
– Owing to various reasons, you could not build a retirement corpus while working. There could also be some unforeseen expenses which you could not plan earlier. To meet these financial needs, you need not sell your home to raise the money as during your retirement years a reverse mortgage loan can convert your existing home into an alternative retirement corpus while you continue to enjoy living in it during your lifetime.
While taking a loan is always not advisable but taking a home loan is different from other loans. With a home loan, apart from enjoying tax benefits, you feel safe and secure, create your own space, build an asset and most importantly use the asset during your sunset years, if so required.
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