What are the benefits of applying for home loans?

Over time, there has been a massive increase in the number of borrowers applying for a home loan. This increase is owing to several factors amongst which the benefits are on the top. The introduction of many customer-friendly schemes is the reason for the increase in the number of borrowers.

Some of the schemes come with simple home loan eligibility criteria, lower interest rates, especially for women and senior citizens, no EMIs until possession, and attractive deals. However, here are the detailed benefits to apply for home loan:

Possession of the asset

Buying a house is not simple. It is the biggest financial commitment. You need to pay the EMIs, which might be heavy on your pocket. But more importantly, there is happiness that now you own a home. This asset provides a sense of accomplishment. Buying a house is also counted as an investment for a secure future.

Low-interest rates

House loans are secured loans. The home loan interest rates are generally lower compared to the unsecured ones. The tenure for such loans goes up to 30 years. The rates might fluctuate, but they are never as high as the unsecured loans. Thus, you are sure to receive a good deal if you decide to get the loan.

Tax benefits on the interest repayment

One of best benefits you can enjoy with a house loan is the tax benefits that come with it. According to Section 24(b) of the Income Tax Act, there is a tax deduction of up to Rs. 1.5 lakh towards the interest payable annually, post the construction or purchase of the property. The interest paid towards the loan for the pre-acquisition or pre-construction phase gets deducted in five annual instalments, starting from the year in which the house was acquired or constructed.

Tax benefits on principal repayment

Under Section 80C and 80CCE, there is a yearly tax exemption of up to Rs. 1 lakh on the principal sum repayment of the housing loan. The deduction gets done from the total gross amount subject to fulfilment of prescribed conditions.

No prepayment penalties

Lenders typically charge prepayment penalties whenever you prepay the loan. But when it comes to home loan in India, there is a lock-in period which varies between lenders. Payment made towards the loan after the lock-in period is not chargeable. Also, no prepayment charges are applicable on the floating rates. So, whenever you hold surplus funds, pay it towards the loan and lower your financial burden.

Though there are plenty of benefits, still it is a huge financial decision to consider, and you need to be careful and precise before making the decision. Remember, borrow based on your capacity and do not miss a single EMI. Research thoroughly before opting for a deal.

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