When properly managed, a loan can be the most powerful tool for accomplishing your financial goals. And when it comes to achieving a major life goal like purchasing a home, which is a big dream of almost all Indians, a home loan is a tool that can help a lot of people.
Yes, a home loan is definitely a very big responsibility, but, despite the huge amount and the long term, your home loan offers you certain benefits. When you are planning to apply for a home loan, you deserve to know how it is beneficial to you. That is why, in this post, we have outlined the advantages of taking out a home loan.
Home Loan Advantages
- Investing in a long-term asset that appreciates in value
Real estate prices have been steadily increasing for the previous decade, as per data from the Bank of International Settlements (BIS), with only a few hiccups. Given that more than a third of India’s population is under the age of 35 and will soon wish to buy a home, most analysts anticipate that property costs in India will continue to rise in the long run. As a result, purchasing a home is one of the best investments you can make now.
- Tax Advantages
When you apply for a home loan, you should know that once sanctioned, you get entitled for a number of tax benefits.
The Indian government allows owners to claim a tax deduction on their home loan interest rate for a property that is self-occupied up to a maximum of Rs. 2 lakh under section 24 of the Income Tax Act (ITA).
If you give the property on rent, the interest deduction is limited to the lesser of two amounts — Rs. 2 lakh or the real interest paid including all the properties which are owned by the taxpayer.
- Funds are not locked in
It’s no secret that buying a house in India is costly. Even if you have the funds to purchase a property without taking out a loan, you should not do so. Emergencies can occur at any moment, and it hurts if you have a large sum of money invested in real estate. While a home is a terrific investment, selling it on short notice might be tough. Another consideration is that a house does not provide the same level of return as equities or mutual funds. You can broaden your investments whilst keeping them accessible if you have enough funds.
- Increases your credit score
Paying off your house loan’s EMIs is a terrific strategy to boost your credit score and creditworthiness. If you have a strong track record with your home loan, financing other items such as vehicle loans or your child’s education loan becomes much easier.
- Debt at the Lowest Cost to Acquire an Asset
Home loan interest rate in India is cheaper than any other loan rate. Because the loan is approved against an asset, it is simple to obtain. The most cost-effective option to fund a long-term asset is with a home loan.
- Save the Rent Money
Finally, a home loan permits you to save money on rent. While many people prefer to pay rent rather than buy a home, having your own home ensures that you really do not waste money. Since you do not own anything, paying rent is a financial loss. Furthermore, renting entails annual rent increases that are frequently larger than inflation. Rather than paying rising rent, one can easily acquire a similar home in 15-20 years. Calculate your EMI using a home loan interest rate calculator and compare it for yourself.
In conclusion
Every Indian’s dream is to own a home. It gives some people a sense of safety, while a sense of accomplishment and success to others. So, if you want to make your dream of owning a house come true, apply for a home loan today!
However, it is a significant financial decision. In India, real estate prices increase nine times out of ten. The purchase of a home is the single most important financial decision a family will make in their lifetime. High real estate costs make it impossible for many people to purchase their dream home, but home loans make it possible by funding up to 80% of the purchase price.
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