The concept of "home" evokes feelings of comfort, happiness, pride, and togetherness.
When it comes to financial decisions, one of the most significant choices you will likely make in your lifetime is whether to purchase a home. If you are considering applying for a home loan, this decision becomes even more important. While most loans are considered liabilities, a home loan differs from loans such as gold loans or personal loans because it involves acquiring an asset that typically appreciates in value over time. This makes home loans advantageous in the long run. The following points highlight the benefits of taking out a home loan:
Thanks to home loans, even middle-class individuals with a regular income can now more easily afford to buy a home. Banks assess home loan applications based on the applicant's credit score and repayment capacity. If you have a steady income and can make the agreed-upon equated monthly installments (EMIs), lenders are likely to approve your application. Home loans typically have longer terms, ranging from 15 to 20 years, which results in lower and more manageable EMIs.
Compared to other loan types like gold loans or personal loans, home loans are provided by lenders at attractive and affordable interest rates. The interest rate usually ranges from 7% to 8.5%, depending on the borrower's profile and the lender's policies.
Since purchasing a home is often a once-in-a-lifetime investment, it's crucial to ensure that the property is free from any legal issues. When you apply for a home loan, the lender conducts a thorough investigation of both the property and the builder's reputation. They review the property's documentation and ensure that the builder has obtained all the necessary clearances from local authorities, as well as confirming the legality of the construction. Reputable builders, such as those in Ernakulam, often have pre-approved upcoming projects due to their established track record.
Another significant advantage of obtaining a home loan is the availability of tax benefits. If you pledge your property as collateral for the loan, you can claim tax deductions on both the principal and interest components of the repayment. Under Section 80C, you can deduct the principal portion of the mortgage payments, with the maximum deduction allowed being ₹1.5 lakh.
Each payment made towards your home loan serves as a form of savings for the future, as it helps build equity in the property. By building equity, you are essentially saving money because you are increasing your ownership stake in the property. This can be beneficial if you decide to sell the home later on, as you may be able to sell it at a higher price than the initial purchase, allowing you to invest in another property or other ventures.
Overall, a home loan offers several advantages, including affordability, favorable interest rates, thorough due diligence by lenders, tax benefits, and the opportunity to build equity and savings for the future.