Home Loan Benefits You didn’t Know About
In the recent years the price of real estate has gone up drastically. If you want to invest in property, it’s almost impossible to do so without a Home Loan. But before you apply for a Home Loan, there are some questions you need to ask. Additionally, there are some advantages of taking a Home Loan that will help you.
The biggest problem you will face is the large amount of money required, but there are also two important benefits to taking a Home Loan. By buying a house, you will have acquired a valuable asset and will be able to avail of tax benefits from the principal and interest payments that you will be making.
Advantages of Taking a Home Loan
Comfort and Satisfaction
Buying a house might probably be the biggest investment that you will make in your lifetime. You will be able to enjoy the comfort of your home and live a rent-free life. Whether you’re a working professional or self-employed, your employment status will have an effect on your Home Loan eligibility . To live in your home is simpler and more secure than renting a house and paying high deposits and rent.
Price Rise In Real Estate
Prices of homes and land have soared in the last few years and everybody wants to buy a house while the prices are still low. Seventy percent of a property’s price is related to construction costs and this has risen by approximately 15 percent per year in the last 10 years. Rent prices increase with inflation and owning your home can shelter you from rising inflationary pressure.
Reduced Interest Rates
Buying a home is a long-term decision. You will most likely spend 10 to 20 years clearing your loan payments, and interest rates on Home Loan might go through several dips and rises, depending on the economic climate. You could get a Home Loan from a financial service provider like Bajaj Finserv that provides Home Loans at low interest rate. There will be a decrease in interest rate at some point within your payment period, which is highly advantageous for any loan seeker. Additionally, depending on the economy, there could also be a period wherein the interest rate declines dramatically, allowing you to prepay your entire payment and shorten your Home Loan tenure.
Take advantage of income tax benefits for a housing loan . According to Sections 24 and 80 of the Income Tax Act of India, these benefits are available for the financial year 2014-2015. Section 24 states that the deduction of interest for a property that is already occupied is up to INR 2 lakhs.
Section 80C states that the deduction on a repayment of the principal amount on a Home Loan is INR 1.5 lakhs. To claim these tax benefits, you will have to pay off your Home Loan within three financial years.
Tax Benefits for Joint Owners
If you want to invest in a residential property with partners, don’t worry, there are tax benefits on Home Loan for joint owners as well. If you take a loan with your spouse and share a 50-50 ratio of the loan payment, both of you can claim deductions under Section 24 and Section 80C separately. You would be able to deduct a combined total of 4 lakhs under Section 24 and 3 lakhs under Section 80C. This can reduce your overall expenditure considerably. The tax benefits vary from person to person depending upon your taxable income.
If you take a joint loan ensure that you plan out the situation to reap maximum benefits and figure out the best time to get a loan.
Home Loan Benefits for Under Construction Property
Purchasing a ready-to-move-in house can be an expensive affair as the prices of residential apartments are continually escalating. Saving some cash is possible, if you consider investing in an under construction property. Generally, under construction properties quote 20% less than completed ones.
Here are the tax benefits for under construction property that you can avail:
- As under construction properties are comparatively cheaper, the funds required for them would be relatively low. Hence, the EMI payable on the loan amount would also be modest.
- As the EMI on the loan is quite reasonable, you can increase your monthly instalments to reduce the loan tenure. This will help you save more on your total interest payment.
- The person who is availing of the Home Loan can postpone the deduction of the interest amount paid during the pre-construction phase.
- The interest amount paid prior to the year of completion is accumulated and 1/5th of this amount is allowed as deduction each year for 5 years from the year of completion. Simply put, the interest paid on the Home Loan during the pre-construction phase can be availed for deduction in these five equal instalments. In case the property is occupied before the completion of these five years, then the deduction is limited to INR 2 lakh. This is one of the major tax benefits for under construction property.
- Another one of the Home Loan benefits for under construction properties is that the loan is structured in a way where time of disbursement of each loan instalment by the lender will coincide with the time of completion of another level of the project by the developer.
- One can avail tax benefits for the stamp duty and registration fee on the property.
These are some tax exemptions for Home Loan under construction properties.
Best Time to Apply for a Home Loan
The banking industry also has its own best times and tough times. It is of utmost importance for you to be aware of the current scenario of the finance sector as that will help you in finding the answers to all the questions that you may have regarding the following determinants:
Time of the Year:
The best time to apply for a Home Loan to get maximum benefit is the end of the financial year. If you had to pick a specific month, April could be your best bet.
Interest Rates in the Market:
Just like any other variable in a volatile domain, the interest rates fluctuate too. There are times when people can reap the best benefits out of the low interest rates that float in the market pertaining to Home Loans.
Prices of Properties:
Digging deeper into the real estate industry will not only help you get the best price for the property you wish to purchase, but will also give you invaluable insight when it comes to calculating your own expenses, reaching out to the best lender and ensuring the successful repayment of the loan.