Are you planning to avail home loan and want to know benefits? Well, there are many because the thought of owning your home can bring you a huge sense of accomplishment- along with overwhelming financial anxiety. Thanks to the growing inflation and the skyrocketing real estate prices, most of us can seldom afford to buy a house via savings alone. But we say that even if you have sufficient funds to buy a house, it is better to pay off a part of the purchase with your home loan.
A home loan, contrary to popular belief, is a good liability and can benefit your finances.
Here are 6 lucrative benefits of taking a home loan:
Home Loan Tax Benefits
Your home loan comes with several tax incentives that will help you save a lot of money on your taxes.
- Section 80C allows you to seek a tax deduction of up to 1.5 lakhs for the principal sum of EMI paid for the year if you do not intend to sell the house within the next five years. In addition, under 80C, you can subtract up to 1.5 lakhs in stamp duty and registration fees.
- Section 24 allows buyers to claim a deduction for interest paid on their home loan of up to Rs.2 lakhs if the homeowner or his family lives in the estate
- Section 80EEA allows you to claim an extra deduction for interest paid up to Rs.1, 50,000 if your stamp value does not exceed 45 lakhs.
- Pre-construction Tax: If you use a home loan to purchase a pre-built house, the tax savings can begin just after the construction is completed. This isn’t always negative since the government still allows you to claim an interest in EMIs paid during the pre-construction time. You can claim the entire interest on the EMI paid (up to 2 lakh INR) in 5 equal installments for the following 5 years once the construction is completed.
- Tax benefits for Joint Loans: If both parties are co-owners of the house and have taken a joint loan, each can seek a deduction of up to 2 lakh on interest and a principal repayment deduction of up to 1.5 lakhs in their tax returns for the year.
Home Loans Are At An All-Time Low
For a second home, you can claim the full amount of housing loan interest charged under Section 24B of the Internal Revenue Code. Mortgage rates are at an all-time low.
If your credit score is more than 750, you can avail of a loan with interest rates as low as 7% and lower LTV ratios. Some banks, such as SBI, go even further by lowering their interest rates to an all-time low of 6.7 percent. The RBI has also simplified the loan-to-value ratio from 80 percent and above to 60 percent.
Lower LTVs are advantageous because they require less borrowing against the final amount. As a result, this is an excellent time to buy a home and save money on EMI payments.
Digitalization Makes the Process Easier Than Ever Before
As millennials’ appetite for home loans grew, banks quickly capitalized on the potential by opening online channels to expedite loan disbursement. Millennials with more discretionary income value schemes that are fast and easy to use. As a result of this increasing popularity, several banks and financial institutions have launched digital programs. It is to assist consumers in obtaining loans more quickly and moving on with their home-buying plans. This is surely one of the biggest home loan benefits to consider as one can easily avail cheap home loans.
Flexible Repayment Options
- Home loans are typically repaid over a long period (up to 30 years)
- Choosing a home loan with floating interest rates implies that the EMI would fluctuate in line with market interest rates. This assumes that as market prices rise, your EMI rate rises, and as market rates decline, your EMI rate falls. This is welcome news, as interest rates on home loans in India have slowly declined over the last two decades.
- For those that are unfamiliar, most other loans have a prepayment fee that you must pay if you repay the loan past the due date. Prepayment penalties do not apply to home loans.
Appreciation of Assets
Renting a house is no longer a financially sound option, particularly if you can afford to purchase one. Rent prices have increased by 13% in the last decade, although our wage growth has been much slower.
At the same time, buying a house will potentially help your finances. Property costs have jumped by 40% in the last decade, and there is an ever-increasing market for rental houses.
We don’t always have the necessary funds to purchase a home. Home loans can assist us in being homeowners of your dream real estate.
Beneficial Financial Laws
Several laws in India are built to encourage people to buy homes, including the Pradhan Mantri Awas Yojana scheme. The scheme aims at ‘ a housing for all by 2022’ and is designed to help economically backward society. It also helps the middle-class bracket of buyers.
On qualifying for this scheme, you can get a house loan with a 6.5 percent subsidized interest rate. Also a 20-year wide tenure. You can even avail of a construction loan to build a ‘pucca house’. There are additional benefits for widows, senior citizens, and differently-abled citizens under the PMAY scheme.
The End Note : Getting a home loan may seem like taking on an additional liability, but it is the opposite of a financial burden. Home loan can give you so many benefits such as saving taxes to allowing you to let your assets do the earning for you.
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