“A house is made of walls and beams; A home is built with love and dreams.”
Buying a house of your own has become a privilege these days due to the real estate prices touching skies. A home loan can assist your dream of buying a home as it funds up to 80% of the cost of the property. A home loan is extended to an individual to buy a house. The property is mortgaged with the financial institution until the repayment of the home loan. The title deed will also be held by the lender until the full repayment with the due interest on time. A home loan can also be taken for construction, reconstruction or renovation of house and not only the buying.
Buy House using Home Loan
Benefits of a Home Loan
- Helps you buy your dream home
Many people cannot afford to buy a house out of their savings. A Home loan makes it possible with manageable monthly instalments.
- No pre-payment charges
There are pre-payment penalties on floating rate home loan. So, your surplus money can be utilised to make the home loan repayments and lower your burden. Unlike other loans, you can save your pre-payment penalties by getting a floating rate home loan.
- Tax Benefits up to Rs. 3.5 Lakhs
The Government of India provides tax deduction on the principal as well as the interest rate on home loans. The aim behind this tax deduction is to encourage more and to buy their own house. As an individual taxpayer you can claim an up to Rs. 1.5 lakh as deduction under section 80C of Income Tax India Act, for the principal amount repaid in a financial year.
You can also claim an additional deduction of up to Rs. 2 lakhs under section 24 on the interest paid for the home loan. You can claim deduction on the under-construction property too, only that the deductions will apply once the construction is complete.
- Balance Transfer Facility
A home loan provides you with the facility to shift your lender if he’s offering you a lower interest rate. You need to check your Balance Transfer Calculator to find out how beneficial it will be to transfer your loan amount.
- High repayment tenure
Home loan has the highest repayment tenure among all types of loans. It goes up to 30 years. One can reduce the burden of monthly instalments by extending the mandate according to their capacity.
- Saves you from paying rent
As rent in metro cities is quite high, getting a home loan and paying EMIs is a better option. Rents nowadays can put your budget in a tight position. Buying a home of your own saves you from this situation. You will also benefit from the rising prices of the property with time.
Home Loan Interest Rates
There are mainly two types of home loan interest rates:
- Fixed Interest Rate
In this system, the home loan interest rate remains the same throughout the tenure. However, one can shift to floating interest rate system after a limited period of the loan tenure. Fixed Interest rate shields you from any fluctuations in the interest rates and helps save money in the longer run.
- Floating Interest Rate
In Floating interest rate system, the interest on your home loan is subject to the most current lending rates of the bank. The fluctuation depends on many factors such as RBI monetary policy and lending rate revisions. The most significant advantage is when the rates fall, you will save on interest charges.
The home loan interest rates also vary with the types of home loans. Usually, home improvement charges are high as compared to standard home loans.
Reputable financial institutions like Axis Bank offer home loans at low-interest rates, with floating rates that change to pass on the prevailing repo rate benefits to customers. Another feature you should look for while getting the home loan is the online management of the loan. At times when the auto-debit facility fails to debit the EMI from your account, online payment will save you additional interest charges.
