If you are planning to buy a house, then you might find many people who suggest that if you have sufficient money, then it is better not to apply for home loans. But before taking any decision, You must know that home loans have various benefits like savings tax, liquidity. Also, help your assets to grow.
If you manage the loan well, it could be a great financial help. Especially if it is about a dream of having an own house, then the home loan is an option which benefits numerous peoples. But you still must be wondering why you should opt for a home loan even if you have enough money to buy a house.
Then you must know that lack of money is not the sole reason why people apply for a home loan as most people prefer home loans because of the benefits it offers. Thus the home loans are considered the cheapest borrower, which charges low interest. And it is different from other loans as it doesn't involve any penalty on prepayment of the loan, which involves floating interest.
The home loan is the best tax-saving tool you can find nowadays as you can save huge sums of money on tax under various sections like Section 24, 80C, and 80EE of the Income Tax Act. The total tax deduction you can avail of on home loans is up to 5 lakh, which includes ₹1.5 lakh on Repayment of principal along with ₹2 lakh repayment on interest.
Help In Growth Of Funds
Even though you have saved enough funds to buy your dream house, you might prefer opting for home loans as it avails tax deduction. So it helps you utilize such savings on other investment tools to earn more returns. It also provides financial benefits as the current interest rate on home loans is ranging between 7.9% to 8.3% each year. Which mainly depends on factors like credit scores, the number of loans, and the repayment period. It is the lowest recorded interest rate that RBI is currently offering, intending to link the rate of interest with the current repo rate.
Benefit Of Liquidity
In a situation of a desperate need for money, you might have to turn toward financing tools like personal loans, mortgage loans, etc. These types of loans charge higher interest rates than home loans, so it is beneficial to save your hard-earned money rather than spending it on buying a house. Thus you can save your hard-earned money for emergencies like sudden medical funds, education funds, etc.
Additional Verification Of Property By Banks
Every bank performs a strict verification routine before providing a home loan, which reduces your risk of fraud. They double-check everything, which includes project-related paper, titles, and clearance certificate while approving the loan. So if the bank approved your home loan, then you can be sure about the Genuity of the project.
Few Things You Must Consider While You Apply For Home Loans
Keep Track Of Credit Score
The credit score serves as a basic foundation for home loan applications. The credit scores are determined by your monthly EMI payment's regularity, along with other credit dues. The credit scores are recorded on a credit information report which mainly serves as a history of your last borrowing from various institutes. These reports are mainly prepared by credit bureaus that keep a record of credit and share that information with bankers or lenders.
Analysis of Your Budget, EMI, etc
It is wise to analyze the budget of buying a house along with a down payment and how much home loan will be enough for your dream house. Generally, banks offer you a home loan whose value is almost equal to 80%of the total value of property only if you have a stable source of income. Thus you first need to be sure which EMI range will put less stress on your monthly budget. However, many online sites offer you the facility of monthly EMI calculations.
Prepare The Document
But before you apply for home loans, you need to provide all the necessary documents which the bank demands. The documents you need to provide –
Income Tax Returns or Form 16 of last 2 to 3 years
PAN Cards, voter Id, etc
Adhaar Card
Previous 6-12 months bank statements
Salary Slip of the previous 3 months
And a properly filled application along with a photo
Thus you must carefully assess all the above points. While applying for home loans, as it can improve chances of approval.
