What Are the Advantages of Taking a Home Loan?

One of the biggest financial decisions in your life will be purchasing a dream home for you and your loved ones. Add to that the decision to take a home loan and it becomes an even greater commitment.

Advantages of Taking a Home Loan

For the average middle-class Indian, the home loan can be viewed as a huge liability that has to be repaid to the lender over several years. Therefore, one has to be absolutely convinced about the home loan advantage factors before deciding to take it in the first place.

Here is a list of home loan benefits.

A Home Loan Makes It Affordable to Purchase Property:

Whether you are self-employed or salaried, availing of a home loan to buy your dream property is the most convenient method of funding the purchase. If the prospective borrower has a good CIBIL score of above 700 and a positive credit history, getting the loan is much easier. This is because the lender feels reassured of the applicant’s sense of financial responsibility.

Must Read :What is CIBIL Score - How Does it Impact Your Home Loan Application

Moreover, home loans come with long repayment tenures of up to 30 years. If you opt for the maximum tenure, the monthly instalments will not burn a hole in your pocket. Plus, you will be able to diversify the surplus funds towards your retirement planning or perhaps a luxury purchase.

A Home Loan Offers Cost Effective Credit:

Home loans are offered by lenders at attractive and low rates of interest in comparison to other types of loans such as loans against gold or even a personal loan. Generally, the rate of interest ranges between 6.5% to 18%, depending on the borrower’s profile and the lender’s policy. If you have an existing relationship with a lender, then you can negotiate preferential interest rates based on your credit and repayment history.

Generally, the interest rates on a home loan are low because the borrower pledges the property purchased as collateral to the lender until such time that the loan has been repaid in full.

A Home Loan Helps in Enhancing Net Worth:

Many people tend to invest in real estate as the market has shown consistent growth in India over the years. With appreciation in real estate prices, it is a sure shot route to grow your net worth.

A home loan is a logical way to finance if you wish to acquire one or more real estate properties for investment purposes. Even with paying the interest component across the entire repayment tenure, the appreciation capital will be higher in the long run. If you wish to sell the property, the return on investment will result in greater profit.

A Home Loan Supports Compounding Savings:

Availing home loans and repaying them through affordable monthly instalments ensures that your dream home does not become a burden on your pocket. As a matter of fact, with longer repayment tenures you can have leftover funds from your earnings. These funds can be then channelised towards financial instruments that offer potentially higher returns.

In the long run, this helps in compounding your savings, thus helping the borrower in wealth creation and accumulation.

A Home Loan Guarantees Property Safety:

When you purchase a property, it is important to make sure that the investment is free of any legal disputes. However, for an ordinary borrower, running a check of this magnitude can be overwhelming.

This is an added home loan benefit for salaried and self-employed individuals as availing this type of finance automatically triggers a full background check on the credibility of the builder as well as the property itself. The chosen lender undertakes this exercise on behalf of the borrower. The outcome is to make sure that the property is legal, and the real estate developer has all the necessary documentation and certificates from the relevant authorities. Once the lender receives a positive report, the borrower is absolutely assured that the property is free of any legal disputes making it a safe purchase.

It is also recommended to get insurance along with your home loan, to protect your property and your loved ones in case of any unforeseen events. SMFG Grihashakti enables borrowers to access top insurance products from reputed providers. To know more, visit our insurance pages, or contact us.

A Home Increases Loan Eligibility:

As you keep paying off the loan in a timely manner, the act categorizes you as a responsible borrower to the lender. Making your repayments on your home loan has a significant impact on your CIBIL score and credit report. This improves your eligibility to avail of more loans in the future.

Once you repay the loan in full, you can avail a number of other loans at competitive rates of interest.

A Home Loan Offer Tax Benefits

Another key home loan advantage for self employed and salaried individuals is claiming tax exemptions on the principal component of the home loan repayment. Under Section 80C of the Income Tax in India, the borrower can tax benefit on a home loan up to Rs. 1.5 lakhs in a given financial year.

Furthermore, you can do a lot more tax saving with a home loan by claiming deductions on the interest part of the loan repayment too. This falls under Section 24B of the Income Tax Act. The deduction has been capped at Rs. 2 lakhs per year.

In Conclusion

Needless to say, the advantages of taking a home loan are many. Having said that, it is still a massive financial commitment. Therefore, it is recommended that you speak to your chosen lender before putting your application forward.

However, if you are in need of an immediate home loan, feel free to speak to SMFG Grihashakti’s home loan department for in depth information. Apply online today.

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