Know the Top Four Benefits of a HOME LOAN
Buying a new house and calling it their own is everyone’s dream. Home is one of the biggest investments, both emotionally and financially. However, zooming real estate value has made it difficult for an individual to buy a house through personal savings entirely. That is the prime reason behind banking sectors and private lenders offering numerous home loan options.
Applying for a home loan is exciting, frustrating, and a source of anxiety. Because of its long-term tenure and complicated application process, housing loan is termed the biggest liability.
Although people get apprehensive about taking up home loans, there are numerous benefits.
Benefits of Home loan
- Capital Appreciation
Over the past decades, we have seen uninterrupted appreciation in property prices. Given that India’s one-third young population is heading towards owning a house, property prices will soon increase. With improving job opportunities and people locating to metro cities, there are chances of a 15% annual appreciation in properties.
Additionally, rents seem to match this inflation, making the home one of the investments shielding you from long-term uprising inflations.
- Improves Credit Score
A housing loan is one of the biggest financial decisions. When you pay the home loan EMIs (equated monthly instalments), it improves your credit score and creditworthiness. When you score a good record on your housing loan, it becomes easier to raise finance through student study loans, car loans, or business loans.
- Tax Saving
A home loan, be it HDFC or LIC home loan, is considered one of the best tax-saving instruments. According to tax deductions accessible under Sections 24, 80EEA and 80C of the Income Tax Act, a home loan borrower is entitled to claim a tax deduction of up to five lakhs. This can help the debtor reduce his overall tax liability by Rupees 1.5 Lakhs when he falls under the 30% tax bracket.
The deduction under Income Tax Act is only available on fully-constructed houses. Pre-constructed or under-constructed houses are not covered under this act.
- Opportunities to Raise Fund
There is no denying that home loans are expensive. However, even if you possess a sufficient amount to buy your house, you may still want to avail financial loan to save on taxes. Besides that, emergencies may pop up anytime, and it isn’t easy to reimburse your cash locked up in the real estate. Although buying a house is a good investment, liquidating the same takes longer.
Instead, investing money in mutual funds, shares and stocks will garner better returns than blocking them in real estate.
There is no correct answer to whether you should apply for a home loan or use your funds. Using your own funds might be a good step and will sound like a comfortable option, but your credit score will be affected highly. It might sound viable for those who cannot handle long-term debts. However, it is advisable to take home loans if you do not own sufficient liquid cash and want to enjoy the benefits attached to loans.