There has been a massive increase in the number of home loan borrowers in recent years. This increase is the result of several factors, among which the benefits of taking a home loan is on top. The introduction of several customer-friendly schemes by the banks is also among the reasons which has contributed in the increase of home loan borrowers.
Some of the customer-friendly Home Loan schemes come with simple eligibility criteria, the lower interest rate for women, no EMI till possession and several discounts in the offer period. However, here’s a detailed discussion on the benefits of taking a home loan in current laws which has made it a popular choice for the borrowers.
Benefits of Taking a Home Loan
You Get an Asset
Buying a home is not an easy task, it is one of the biggest financial commitments of one’s life. You need to pay EMIs which may be heavy for your pocket. But instead of all this, there is happiness that now you have your own home, an asset which can give you a sense of accomplishment. Buying a home is also counted as an investment that can secure your future as well.
Home loans are secured loans with a lower payable interest rate as compared to the other unsecured loans. The tenure period for a home loan goes long which is a maximum of 30 years and a minimum of 10-years. The interest rates may go up and down but it never goes too high as unsecured loans. Generally, the home loan interest rate ranges from 7.35% to 8.50%. Thus, you can be sure that you will be having a good deal if you decide to have a home loan.
Tax Benefit on Interest Repayment
A major benefit that you get by availing a home loan is the tax benefits associated with it. As per Section 24(b) of the Income Tax Act, a tax deduction up to ₹ 1.5 lakh can be availed towards the total interest payable on the home loan in one year after the construction or purchase of the property.
The interest paid for the home loan availed for the pre-acquisition or pre-construction period would be deductible in five equal annual installments, starting from the year in which the house has been acquired or constructed.
Tax Benefit: On Principal Repayment
As per the Sections, 80C and 80CCE of our income tax Act, 1961 the principal repayment up to ₹ 1 lakh on home loan will be tax exempted in every financial year. The deduction will be done from the gross total income subject to fulfilment of prescribed conditions.
Tax Benefits on the Second House
In case you buy your second house, you can still claim a tax deduction for the entire amount you paid as interest for your home loan. The deduction is possible under Section 24B of the Income Tax Act.
No Prepayment Penalties
Lenders charge prepayment penalties when a borrower prepays his/her loan. But in the case of home loans, there is a lock-in period that varies from lender to lender. Payment made towards home loan after the lock-in period is never chargeable. And no prepayment penalties are charged on floating rate home loans. So, whenever a borrower has surplus money, he/she can pay it towards their home loan and lower their financial burden.
Though taking a home loan has many benefits, still it is a big financial decision and one should be very careful and clear before taking this decision. Remember, borrow as per your capacity and try not to miss even a single EMI. Research well before you opt for a particular home loan provider and compare it with all the schemers available in the market.