A home loan is a secured loan. Banks and NBFCs provides home loan or construction loan to Applicants. Most Banks and NBFCs get the property valued independently and provide loans based on their estimated value.
If you take Home Loan, you must be paid interest. Property experts have different opinion & they advice to buyers to avoid upfront payment.
Having a Home Loan has several advantages:
Avail of Taxation benefits:
Home Loan Applicant can get several tax benefits. They can claim a deduction of Rs. 2 Lacs on the home loan interest under section 24 of the Income Tax( I-T ) Act if the property is Self-Occupied.
The income tax deductions include 30 percent of the rental income, plus municipal taxes paid and the interest paid on the home loan in case of a rented property. The loss from house property resulting from the deductions that make the rental income zero or negative can be set off against other income tax heads, thereby reducing the overall tax liability on the taxpayer. On the principal repayment, a deduction of Rs 1.5 lakh can be claimed under Section 80C of the I-T Act.
A very important point to be taken into consideration is that real estate investment is a huge investment. A big investment all-together might lead to lock-in of your funds. Experts caution against putting all the sums of money together at once and suggest making judicious plans to use the funds. Though investment in real estate is a good choice, it won’t fetch results like investments in bonds, mutual funds, stocks, etc. It is advised that instead of locking in the money in real estate investment, one should opt for diversification of investments to add to the portfolio and get better results.
One’s credit score is impacted by the timely payments of EMIs on home loans as well as the repayment of the principal amount. If one’s creditworthiness improves over time, it is easier to get future loans as well as opt for credit cards.
Ensure you have enough money and funds to provide for contingencies. It is not advisable to put all money in real estate or invest in other investments all at one-go.
If you pay the money upfront, there would be lesser chances to consider better options of houses since the budget would be restricted to the extra amount one has. Choosing a home loan will increase the chance of opting for a better house in a better location.
It is also imperative to note that a home loan is the cheapest form of debt in India and is offered by banks and other financial institutions at attractive rates. It is also the safest way to not compromise on one’s liquidity. One should make an informed decision by analysing all the pros and cons of choosing to pay upfront and opting for a home loan.