Owning a home of your own can be one of the biggest dreams and achievements of your life. Having a shelter of your own not only gives you a sense of stability in life but also makes one feel at peace without having to depend upon anyone. However with the growing cost of Apartments, property and construction expenditure, it is really difficult for anyone to depend solely upon their savings to own their house. This is why most of the people depend upon a housing loan.
With a home loan one can fund at least up to 80% of the cost of the property. In a home loan an individual is extended a loan to buy his or her house and in return the property is mortgaged to the bank or non banking financial company. The lender holds the title deed of the property until the repayment of the loan is done in time. It is certainly one of the major liabilities but home loan also serves you with many benefits and advantages. Some of the important advantages of home loan are discussed below:
Along with home loans the government provides attractive tax deductions on the principal and interest rate. A person acquiring a home loan can claim up to a deduction of Rs 1.5 Lakh under section 80c of the Income Tax Act of India. A tax deduction of up to Rs. 2 lakhs is allowed on the interest rate as mentioned in section 24b of Income Tax Act of India. The tax benefit is only available after the complete construction of the house. One cannot claim tax deduction while the property is still under construction.
Tax Deduction on the Second House
If you are buying a second house using home loan then under the section 24B of Income Tax Act, you are eligible to claim for the entire amount of housing loan interest you pay.
No Pre-payment Fees is charged
For most of the other kinds of loans the lenders charge a typical prepayment penalty on the payment of loan before hand. But for a floating rate home loan there are no prepayment penalties. So this allows you to pay a part of your loan whenever you have surplus money. This not only lowers your burden but also makes your repayment faster.
Balance Transfer Facilities
In case you find a lender who offers you home loan at a lower interest rate, then you can easily transfer from your existing home loan lender to the new one. The new home loan lender will pay your remaining loan amount to your present lender and get hold of your title deed. Once all your documents are with your new lender, your new home loan interest rate will begin. You can also transfer your home loan account if your current lender seems to be non cooperative or does not provide convenient services.
Longer Repayment Tenure
Home loans have the longest repayment tenure in comparison with other loan types. Home loan repayment tenure can go up to about 30 years, so this lowers the burden of Equated Monthly Installments. You can easily plan your budget for a couple of years and keep repaying your loan easily with proper financial management and without having to run out of savings every month.
No Burden of High Rents
Living in a rented house can cost you a bomb if you are living in a city or Metropolitan. Paying rental is basically paying for a shelter that is not of your own. So buying a home not only gives you shelter but it is also a form of investment. Thus no matter how high your loan amount is at the end of the day you are investing into something that will be your own in the future once the loan is totally paid. You will be living in your own home while the repayment is under process and get your title deed once you have paid the loan amount.
Boosts Your Credit Score
If you are punctual in paying your EMIs against your home loan and complete your tenure without much defaults then it will directly boost your credit score. Also when you take over the ownership of your home completely it becomes your most expensive asset. So it is convenient for any lender to give you a loan against it. The ownership of a house of your own makes you a most eligible candidate for lending money any further. In a financial crisis, you can use your house or land to acquire a loan against property and personal loans.
Other Uses of a Home Loan
With a home loan you cannot only buy properties or houses but you can also invest the money into making renovation or addition to your existing home. A Home loan can be used to add floors to your house. For instance, if you have a single storied house, you can use the loan amount to make it double storied. Similarly, you can build garages or extra rooms with the loan amount. You may use it for renovation purposes and give your home a new makeover. Apart from all this mortgaging your home can also allow you to fund your children’s foreign education or vacations abroad. There are no restrictions as to how you may use the home loan amount as long as you repay it in time.
Due Diligence is Carried Out
One of the most simple yet important benefit of acquiring a home loan is proper due diligence of your property. When you apply for a home loan with a bank or non banking financial company, they make sure that your property is completely free from any kind of legal disputes. They do a thorough background check to ensure that there occurs no unexpected issues in the future. It is a stringent and formal procedure that certifies your property is safe and legal. Therefore it saves you a lot of time and trouble of conducting a due diligence all by yourself.