Unlocking the Benefits of Home Ownership: Understanding Home Loan Interest Rates
During the Covid-19 pandemic, it felt like the world has come to a standstill and after the pandemic settled down, it felt like the world economy would never revive. One of the sectors that was hit the worst during the pandemic is the real estate sector. However, with a little push and some reforms brought in by the Reserve Bank of India, the real estate sector revived back in no time and is now booming. Real estate prices are bouncing through the roofs. Unfortunately, this is also the reason why many people are shying away from buying homes. However, if you want to become a home owner, now is a great time to buy a home. Home loan interest rates are still low and you can buy your dream home while keeping your home loan EMIs still affordable. A home will not only bring you mental and financial peace and well-being, but it will also ensure you have a roof over your head in case of a financial emergency or a monetarily difficult period. In this article, we look at the benefits of home ownership facilitated by a home loan. Further, we also share with our readers some tips on what they can do to ensure their home loan interest rates stay on the lower side.
Benefits of Home Ownership Facilitated by a Home Loan
Home Loan Tax Benefits
One of the biggest benefits of a home loan is that it comes with home loan tax benefits and using these home loan tax benefits, a borrower can save a considerable amount of money each year. Section 80C of the Income Tax Act allows borrowers to save up to a maximum of Rs.1.5 Lakh on payments made towards principal repayment and Section 24b permits home loan tax benefits up to a maximum of Rs.2 Lakh on payments made towards interest repayment. Married couples can claim these tax benefits separately, which helps further maximize tax savings. That apart, if a home loan borrower buys another home with another home loan, they can claim the entire amount paid towards the repayment of the interest component under Section 24b of the Income Tax Act. However, do keep in mind that the maximum amount that one can claim on all home loans combined cannot exceed Rs.2 Lakh under Section 24b and Rs.1.5 Lakh under Section 80C.
Home Loan Owners Save Rent
With the workforce returning to work, the demand for rental homes has been increasing consistently, especially in tier-1 cities. This has led to homeowners increasing rent every now and then. People in cities like Bengaluru, Mumbai, Hyderabad, Chennai, etc., are finding it difficult to afford decent rental properties. Home owners do not have to worry about rent. They do not also have to worry about evacuating their home on a short notice. Further, buying a home is considered a smart decision because it is better to pay EMIs than to pay rent. After all, at least when you pay EMIs, you build an asset.
A Home Is an Investment Guaranteed to Fetch Good Returns
People talk about mutual funds and other saving schemes all the time but the statistics prove that not every mutual fund and saving scheme delivers good returns. In fact, most mutual funds have delivered only 3% to 5% returns over a period of 20 years. A home, on the other hand, has proved to be a safe investment option repeatedly. Over the last few years, the real estate sector has delivered stellar returns and the trend is likely to continue in the future.
In conclusion, it is established that buying a home is a smart decision. However, since homes have become insanely expensive, it is quite likely that you must avail of a home loan to fund your property purchase. If you are planning to avail of a home loan, make sure to negotiate for a low home loan interest rate. Low home loan interest rates make EMIs affordable and reduce the total cost of borrowing the loan. Here are a few tips on how to score a low home loan interest rate deal.
Tips on How to Avail of a Low Interest Rate on Your Home Loan
- To start with, maintain a high credit score. A high credit score indicates high creditworthiness and therefore, borrowers with a high credit score get offered loans on low home loan interest rates.
- Paying a higher down payment would reduce the risk involved for the lender and encourage them to offer you a loan on low home loan interest rates.
- Apply for a loan amount equal to or lower than what you are eligible for to avail of a low home loan interest rate deal. Use a home loan eligibility calculator to figure out the loan amount you qualify for.
- Reduce your debt-to-income ratio. Ideally, no more than 40% of your total income must be going towards paying debt.
- Repay some of the loans, if you can. As mentioned before, lenders do not like lending money to borrowers whose debt obligation is already too high. Clearing some of the loans will increase home loan eligibility as well as chances of getting approved for a loan on good terms and conditions.
Final Words
A home will bring you mental peace and financial security. So, if you have been planning to buy a home, wait no more. Just find a lender who you can trust and who will prove to be a good home loan partner in this long and fruitful journey.
