How to maximise your savings on your Home Loan interest payments
Investing in real estate is a great way to fatten your bank account in the long run, but coming up with the initial capital is no mean feat. You’re most likely going to take a home loan to be able to afford the property in question.
Because of the large sums of money involved, it’s important to save as much as possible during the transaction. In this article, you will learn about the various ways you can save money on your home loan.
Hunt for the Best Interest RatesThe first step to saving on your home loan is to find the best home loan interest rates possible because this affects the EMI you will be paying monthly. The money you’ll be spending on this can add up to quite a large sum if you opt for a loan that has an extended tenure. The lower your interest rate, the less money you’ll have to pay back over time, saving you some money in the process.
If you’re looking for the best Interest Rates, you should check out the Home Loans offered by Bajaj Finserv. The interest rate that they offer is among the lowest that you can get in India.
It’s important to save on additional fees when applying for a Home Loan, if you apply online for a Home Loan with Bajaj Finserv, you will be charged a processing fee of only 0.8%.
To Fix or Float?Another great way to save money on your home loan interest is to pick the type of interest rate that works best for you. You can choose between loans that have fixed or floating interest rates. Let’s take a look at what these terms mean.
If your loan has a fixed interest rate, it means that the interest rate remains unchanged for the whole tenure of the loan.
Floating interest rates, on the other hand, are set by a reference, and might go up or down during the tenure of the loan depending on the reference. The reference is called the ‘Prime Lending Rate’ or the ‘Floating Reference Rate’.
After you’ve done your research, if you think that the Prime Lending Rate is likely to rise in the future, go for a fixed interest loan. If you think that the interest rate is likely to go down in the future, it’s advisable to go for a floating interest rate. When the reference rate falls, your interest rates also decrease and you end up paying less till it rises again.
Make the Most of Tax DeductionsBecause the government wants more people to invest in real estate, which bolsters the economy, an incentive has been put in place to ease the burden on the consumer with regard to home loan payments. This incentive takes the form of tax deductions. You need to be aware of the deductions that you’re entitled to if you want to save as much money as you can on the interest.
Utilising the tax benefit on home loan is one of the main ways you can save money on the interest that you will be paying. You are entitled to tax deductions on both the principal amount, and the interest you pay over time.
If the home loan is for the construction of your first home, which you will be living in, you’re eligible for a deduction of up to INR 2 lakhs if the construction of the house is completed within three years of the financial year during which the loan was taken.
If it’s your first home and you’re either renting it out or it’s vacant, you are eligible for a tax deduction on the whole interest amount, without any limits. This applies for your second home as well.
These are the various avenues that are available to you when you’re trying to save money on the interest you pay on home loans. Remember to choose your interest rates and type carefully, and make use of all the deductions that you are eligible for.