Picture this: the warmth of your own home, the comfort of your own space – it is a dream shared by millions across India. Yet, for many, turning this dream into reality often involves navigating the world of home loans. Despite being a lifeline for countless aspiring homeowners, the true benefits of these financial tools often remain elusive. In this blog, we are going to demystify the benefits of taking home loans in India. Read on as we uncover the often-overlooked advantages that can transform your path to homeownership into a smooth and rewarding experience.
Affordability made attainable
Home loans play a pivotal role in making homeownership more accessible for individuals who may not have the means to purchase a home outright. By spreading the cost of purchasing a home over an extended period, home loans make it possible for individuals to step onto the property ladder with a manageable down payment and monthly installments (or EMI). Furthermore, to make it easier, when applying for home loans through a bank, they provide you with an option to pick your preferred monthly installments, which gives us the privilege of managing finances accordingly.
Save on tax
One of the most widely known benefits of a home loan is the exemption from taxes. One. Under the Income Tax Act, borrowers can leverage home loans to avail deductions on both the principal amount and the interest paid, significantly reducing their overall tax liability. However, this aspect of home loans is often overlooked, leading many individuals to miss out on valuable tax savings.
For example, for those who don’t know, under the Section 24 act of tax law, taxpayers can benefit from the interest they pay on their home loan as long as they are repaying. Before claiming this, it is advisable to check with the bank or seek advice from finance experts for better understanding. Also, there are various exemptions on women-centric loans, which also need to be checked with the bank. Additionally, under Section 80C, taxpayers can enjoy tax deductions of up to INR 1.5 lakhs per year ( conditions applied). This includes benefits on the principal loan amount, giving you extra savings on your home loan.
Favorable Interest Rates
Another lesser-known benefit of home loans is that in India, home loans often come with competitive interest rates, making them a cost-effective option for financing a home purchase (as mentioned in the first point above). Whether opting for fixed or floating interest rates or the different types of home loans, borrowers have the flexibility to choose a repayment plan that aligns with their financial goals and preferences.
Repay on your terms
Home loans taken from banks allow borrowers the flexibility to repay according to their plans and timeline. From choosing the loan tenure to exploring prepayment and foreclosure options, borrowers can customize their repayment journey to suit their needs and circumstances. However, a point to be noted here is that this can only applied after understanding the interest rates that every bank has and the tenure after which the interest rates increase.
Helps build an asset
One of the significant benefits of taking a home loan is that it helps you build an asset. Instead of waiting to accumulate the entire purchase amount, a home loan allows you to invest in a property earlier, enabling you to start building equity. As you make regular repayments towards your loan, you gradually increase your ownership stake in the property. Over time, as property values tend to appreciate, the value of your asset grows, contributing to your overall wealth. In essence, a home loan empowers you to acquire a valuable asset that can serve as a cornerstone of your financial portfolio.
Investment potential
Homeownership through a home loan offers more than just a place to live; it also represents an investment with significant potential returns. As property values appreciate over time, homeowners stand to benefit from capital gains when they decide to sell their property, further enhancing their financial well-being.
Balance transfer facility
Another hidden advantage of home loans is the ability to transfer your home loan balance. With a balance transfer facility, you have the option to shift your existing home loan from one bank to another. Essentially, this process involves moving your loan from one bank to another in search of more favorable terms. These terms could include lower interest rates or improved repayment options. In essence, it is similar to refinancing your loan to secure better benefits. However, it is vital to carefully assess the costs associated with transferring the balance in comparison to the potential savings it could yield. Therefore, while a balance transfer can offer advantages, it is also important to conduct thorough research and consider all factors before making a decision.
Conclusion
Home loans in India offer a plethora of benefits that go beyond just financing a home purchase. From affordability and tax savings to flexible repayment options and investment potential, home loans enable individuals to achieve their dream of homeownership. By understanding and harnessing the full range of benefits that home loans offer, individuals can embark on a journey to homeownership with confidence and clarity, knowing that they are making a sound financial investment for their future.