We all want to buy the best house possible. However, with increasing property prices, making the dream a reality may be a step too far. Home loans come to the rescue here. A home loan is typically used to purchase a house/flat or a plot of land for the construction of a house, or to renovate, extend, and repair your existing home. Here is what is home loan, eligibility, features, benefits etc.
What is a Home loan?
A home loan is a secured loan used to buy a home with the property serving as collateral. Home loans offer high-value financing at low interest rates and for long periods of time. They are repaid through EMIs. The borrower receives ownership of the property after repayment. The Home Loan, like any other loan, is repaid in monthly instalments. Most banks now offer Home Loans that can help you not only buy ready-made homes, but also build a house from the ground up. Home Loans can also be obtained for renovation or repair purposes.
Benefits of a Home Loan?
You can deduct interest and principal payments from your taxable income if you have a home loan. The income tax deduction available for interest and principal repayments is the most significant benefit of a home loan. Section 80C allows you to claim up to Rs.1.5 lakh in principal repayments, up to Rs.2 lakh in interest repayments, up to Rs.2 lakh in interest repayments under Sections 80EE and 80EEA, as well as up to Rs.1.5 lakh in stamp duty duty expenses. Other tax breaks are available with a home loan.Interest Rate:
The interest rate on a home loan is much lower than the interest rate on any other loan type available. If you have a cash crunch, you may be able to get a top-up on your existing home loan at a lower interest rate than a personal loan to solve the problem.Due Diligence:
Banks examine the property from a legal standpoint when you apply for a Home Loan to ensure that the documents are valid and the title is clear. This due diligence check from the bank will reduce your chances of being scammed. If the bank approves the property, you and your family are safe.
Eligibility of home loan
Before applying for a home loan, you can easily calculate your eligibility. You can determine your eligibility using the home loan eligibility calculator available on the bank's website. Enter some basic information such as your monthly expenses, earnings, age, the value of the property you want to buy, and the EMIs for other loans. After entering your basic information, click enter, and the home loan eligibility calculator will calculate the maximum amount you can borrow. As a result, you can apply for a home loan online.
Important factors to consider for a Home Loan?
Home loan Interest rates are determined by the loan amount as well as the borrower's credit score. Make certain you comprehend the type of Home Loan interest rate you are being offered. In contrast to a fixed interest rate, which remains constant throughout the term, a variable interest rate can change. Furthermore, it is extremely rare to find lenders offering fixed interest rate home loans, and they usually come with additional interest implications that end up being costly for the borrowers.Tenure:
The tenure is an important variable because it determines the EMI amounts payable each month on the due date. Knowing the exact tenure will allow you to plan your finances accordingly. The term of your home loan can be tailored to your preferences. You can adjust the loan repayment schedule based on your income.
A lender will only provide 75-90% of the cost of a property as a home loan amount. The remainder of the cost must be paid in advance by you, which is known as a down payment.
It is advantageous to select a Home Loan with a simple application process and minimal documentation. You should ideally choose a Home Loan that allows for online application and quick disbursements.