A home loan is a secured loan that allows you to purchase a property. The property itself serves as collateral for the loan.
Home loans offer several benefits, including high-value funding, competitive interest rates, and extended repayment periods. Repayment is typically done through equated monthly installments (EMIs). Once the loan is fully repaid, the title of the property is transferred back to you.
One of the most significant benefits of buying a house is the opportunity to own a long-term appreciating asset. Unlike renting, where you're essentially paying someone else's mortgage, homeownership allows you to build equity over time as the value of your property appreciates.
To incentivise home ownership, the Government of India offers tax benefits on both the principal and interest repaid on home loans. Section 24B of the Income Tax Act permits a deduction of up to Rs. 2 lakh on the interest component.
When you take a loan you pay relatively lower interest rates than other debt forms, such as personal loans or credit cards. Lower monthly EMIs (compared to other debt forms) helps save money over an extended period.
Many loans impose prepayment penalties, but a floating-rate home loan does not incur such charges. This means that whenever you have extra funds available, you can use them to make partial payments towards your home loan without facing any penalties, reducing your overall debt.
Since a home loan is a substantial loan, banks offer many benefits to the lenders. One such benefit is the balance transfer facility. You can move the outstanding balance of your existing home loan from one lender to another. This choice becomes attractive when you come across better interest rates or more favourable terms and conditions offered by another lender during your loan tenure.
A home loan has a long repayment tenure, spanning up to 30 years. This extended tenure offers borrowers the flexibility to reduce the burden of monthly EMIs. By stretching out the repayment period, borrowers can adjust their EMIs to more manageable levels.
It is advised to opt in for a no lock-in of funds when taking a home loan and opting for an OD account. It is a precautionary measure in case any unforeseen emergencies may crop up. If you exhaust all your savings on buying a house, you could be in a challenging situation during such emergencies. Hence, you will be able to access your home loan funds.
Timely repayment of your home loan instalments can significantly improve your credit score over time. A higher credit score enhances your creditworthiness and makes it easier to qualify for future loans and obtain favourable interest rates.
Finally, buying a house requires thorough due diligence. It includes doing thorough property inspections, title searches, and legal documentation. While this process may seem daunting, it ensures that you make an informed decision and protects you from potential pitfalls down the road.
This is the loan that one takes for purchasing a home.
This loan covers expenditure related to repairs of your home or even renovation.
This loan comes in handy when you are building a new house.
Someone wishing to buy a plot of land for constructing his/her own house can avail this loan.
Suppose you plan to add another room, garage, bathroom, or kitchen to your home.
These are loans taken by two people or more, such as spouses applying for joint home loans.
This mechanism lets you switch your outstanding loan to a different lender.
This loan allows you to borrow more money above the outstanding loan amount.
