It’s absolutely normal to be apprehensive about taking any kind of loan. But if you do a little research you’re bound to understand the benefits of taking a Home Loan.
What is a Home Loan?
A Home Loan is a sum taken from a financial institution to purchase a house or property. The repayment is done over a period of time, in instalments, and clubbed with additional interest. The Home Loan calculation is done using the Home Loan EMI calculator. This gives you the EMI you’ll be paying each month and helps you decide if you can afford the loan.
You can take a Home Loan at the best Home Loan rates by going through the interest rates that different banks are offering across the market. Shortlist the lenders that are giving you a Home Loan at a very low rate of interest. Don’t forget to make sure that you check the past rate of interest rate fluctuations to get an idea of how high or low the EMIs can go.
5 Tax Benefits of Taking a Home Loan
Below are the tax benefits that you can claim while procuring a Home Loan:
If you’re both an owner of the property and a borrower/co-borrower of the loan, you can claim tax benefit for the EMI you’re paying on the Home Loan. This deduction will be applicable from the year your house construction was completed. If your house is rented, the entire interest for the year can be claimed as a deduction. You can claim up to Rs.2 lakh every financial year.
2. Principal Repayment
The amount in the EMI that goes away as principal can be claimed under section 80c of the Income Tax Act. The maximum amount that you can claim for deduction is Rs.1.5 lakh.
3. Stamp Duty and Registration Charges
While taking a Home Loan you’ll be charged for registration and you’ll also be made to pay a nominal amount as stamp duty which is levied on property transactions.
Both of these amounts can be claimed for under section 80c of the Income Tax Act. The only condition is that you need to claim the two amounts in the year you when you paid them.
4. Pre-construction Interest
Not many are aware of this but you can claim tax deduction on the pre-construction interest also. All you have to do is add up the pre-construction interest amount and claim it in five equal instalments. The amount should not be more than Rs.2 lakh.
5. Section 80EE
This slab was added for new homeowners. If the value of your house is less than or equal to Rs.40 lakh and the loan amount you’ve taken is less than or equal to Rs.25 lakh then you’re eligible for this slab. You can claim a maximum of Rs.1 lakh and you should have taken the loan between April 1, 2013 to March 31, 2014.
If you have a co-applicant for the Home Loan, both of you will enjoy each of the above-mentioned tax benefits separately. This means you can enjoy double tax benefits under the Income Tax Act. A lot of people make their spouse the co-applicant to reap tax benefits.
How is Taking a Home Loan an Asset?
Taking a Home Loan to buy your dream house is the best way to go about it. Paying off the loan over a period of time, in regular instalments is more comfortable than having to pay the whole sum upfront.
Yes, you are liable to pay the debt off. But by the end of your repayment, you have a whole property to yourself. Real estate is an ever growing market and owning a house can never be a liability. It’s any day better than living in rented place.
When you have the facility to decide the loan amount and the EMI structure, paying off the sum won’t be a hassle. Using home loan EMI calculator, you can decide if you’ll be able to pay off that sum every month based on which you can decide the amount you’ll be borrowing. And by doing a little research you can be aware of the best Home Loan rates and opt for them.
Another big reason to take a Home Loan is ‘capital appreciation’. Having your own house is a huge investment and it also shields you from inflation. Few years down the lane you can sell your property for way more than you invested in buying or making it. Also, renting your property is a great source of income.
Other Advantages of Taking a Home Loan
Interest rates: Compared to other kinds of loan, a Home Loan has the benefit of low-interest rates. Taking a Home Loan is a long-term commitment. Since the rate of interest is subject to fluctuations you’ll be benefited by low-interest rates at some point of time in the repayment cycle.
Also, banks usually give new borrowers the benefit of a low rate of interest.
You can also foresee what kind of fluctuation you’re in for by studying the past trends.
Credit score: Taking a Home Loan is a great way of building your CIBIL or credit score. Pay off your EMIs on time and opt for prepayment; your credit score is bound to shoot up. This will make you eligible to take more loans without any hassles in the future.