Home loan space for the past few years is abuzz owing to its falling interest rates and changing scenarios. There is no doubt that a well devised financial plan is the key to a comfortable and happy life as it helps you meet your financial goals at distinct life stages. Besides, investment strategy is undoubtedly the highlight as it helps you to grow your funds faster over the long term. However, the major question in today’s time is – are you willing to endow a lot of time to your investments to meet your goal of owning a home? For many, the answer will be ‘NO’.
Giving your investments time would mean you realizing your dream of buying a home in your 60s. Through a home loan, you can speed up the process of owning a home. Remember, in home loan, you always have the option to prepay your loan with surplus funds. Moreover, in the current scenario, with WFH (work from home) becoming the new norm across different sectors, owning a home makes much more sense.
Check out some of the important reasons of opting for a home loan:
- Availability of lower interest rates
Home loan as is a secured loan, it is available at a lower rate. Housing loan interest rate usually begins from just 6.55 percent p.a. onwards. Availability of home loan at lower rate allows you to have a lower interest constituent, which in turn results in reduced loan cost.
Remember, one of the major home loan eligibility criterions is your credit score. If your score is high i.e., 750 and above, you hold higher chances of securing the loan at a lower interest rate.
- Tax benefits available under home loan
Home loan is one of the biggest tax-saving avenues, owing to the number of deductions available as per Section 80 C, 24b, 80 EEA. Overall, you are eligible to claim an overall tax benefit of up to Rs 5 lakh i.e., up to Rs 1.5 lakh on the principal component as per Section 80 C, up to Rs 2 lakh on loan interest constituent as per Section 24 b and up to Rs 1.50 lakh on the interest constituent as per Section 80 EEA. Note that to be eligible to claim deduction under Section 80 EEA, your stamp duty of property must be Rs 45 lakh or below.
- Option to avail top up home loan to meet financial exigencies
When you witness monetary crunch and are propelled to avail financing facilities, it might cost you a lot of interest than the home loan interest rate. Having a home loan makes you eligible to avail top up home loans, which usually come at the same rate as home loan or may be a notch higher. Also, the offered repayment tenure is the same as your home loan tenure.
Like personal loan, proceeds through top up home loan can be used for meeting any personal purpose like home renovation or improvement, car purchase, personal travel, children’s higher education and others. Thus, availability of longer repayment tenure and lower interest rates make top up home loans, one of the cheapest loan options than their alternatives like personal loan or loan against credit card.
- No charge on prepayment in case of floating home loan interest rate
As RBI has debarred lenders from charging any prepayment or foreclosure fee on floating rates, home loans availed under floating rate does not incur any prepayment/foreclosure charges. However, in case of a fixed rate home loan, lenders may charge prepayment/foreclosure fees.
To determine the correct time to apply for home loan, you must consider some crucial factors. These factors include your income, repayment capacity, credit score etc. If you have a positive mark on major eligibility factors, then you can proceed with your home loan application. However, before you apply, ensure to compute your EMI and tenure based on your repayment capacity through the online home loan EMI calculator. Once done, keep your home loan documents handy for a hassle-free process. The documents required for home loan include PAN card, Aadhaar card, passport, residence proof copy, bank statement, last 3 months’ salary slips, form 16, business existence proof, power of attorney, information regarding loan availed with its past record, educational qualification, etc.