You’ve found the perfect home, but, have you given your finances a thought? If the cost of the property you’ve shortlisted doesn’t match your budget, it’s time to rethink your finances. Opting for a Home Loan is one the most popular ways of funding a property purchase in India.
From flexible Home Loan interest rates to minimal closure charges, a Home Loan makes it easier for you to strategies your finances and get a perfect home.
Why it’s currently trending
With the housing sector seeing a rise of roughly 30% in the last couple of years, the real estate sector has entered a ‘bubble’ territory. An investment in real estate has a steady appreciation rate, which is why many people are taking out Home Loans to purchase properties. A Home Loan, unlike unsecured loans, doesn’t come with a high rate of interest. What’s more, during inflation, the rate of interest doesn’t fluctuate unless otherwise mentioned in your loan sanction letter.
The Reserve Bank of India has cut down repo rates by 25 basis points, which has, in turn, lowered the rate of interest on Home Loans. This has further encouraged home buyers to apply for a Home Loan. Apart from this, a new tax exemption rule under the 2016 Budget has provided some much-need relief to home buyers.
Now that you’ve learned why taking a housing loan is beneficial, let’s look at the different processes and factors that have further made Home Loans attractive to the masses.
Hassle-free application process for a Home Loan
In order to file an application for a Home Loan, all you need is an internet connection and a PC. You can easily apply for a Home Loan online without leaving the comfort of your home or office. Using an online calculator, you can also check your loan eligibility, EMI amounts, and rate of interest applicable on the Home Loan.
The online application form would require you to fill in your personal information, property details, and annual income. Your lender will also ask you to submit documents like photographs, identity proof, address proof, date of birth proof, and a signature proof. You might also be asked to show your bank account statements, salary slips, and IT returns or your Form 16.
Once these documents are verified, your loan will be sanctioned and the amount will be disbursed to the bank account you’ve provided.
The quick approval and sanction process of a Home Loan makes it a hassle-free procedure for new loan applicants.
Online eligibility calculator for Home Loans
One of the prime factors that determine the amount of Home Loan you’re eligible for is your income. Salaried employees, with a steady income, have a higher chance of being approved for a Home Loan than self-employed applicants. However, if you’re self-employed, there’s no need to worry as you can always check your eligibility for a Home Loan online. Nowadays, most banks and NBFCs provide an online calculator using which you can analyze your Home Loan eligibility.
Opting for a Home Loan with a longer tenure improves your repayment capacity as it comes with a lower rate of interest. And when your repaying capability increases, your chances of getting the loan approved increase too. Alternatively, you can also apply for a joint Home Loan with your spouse to boost your Home Loan eligibility and avail of tax benefits.
In order to get a quick Home Loan approval, ensure that you pay off your existing loans and maintain a good credit score.
Attractive tax benefits
Under Section 80C of the Income Tax Act, you can claim a tax deduction on the principal amount of your Home Loan. This deduction generally comes with an upper limit of Rs.1.5 lakh. You can also claim a deduction of up to Rs.2 lakh on the interest charges. If you’ve spent a considerable amount on stamp duty and registration fees, you’re eligible for a tax deduction of up to Rs.1.5 lakh.
As mentioned before, an additional tax deduction of Rs.50,000—for first-time home buyers—on the interest charges for a Home Loan amounting to Rs.35 lakh was announced under the Union Budget 2016. This announcement by the Finance Minister of India has encouraged young employees and couples to buy their first home. If you, too, have been living in a rented apartment for long, then it’s time you moved out to your own place.
To increase your tax benefits, you can apply for a joint Home Loan with your partner. According to the ITA, each of you’d get a tax deduction on both the principal amount and interest charges levied on the Home Loan.
The tax benefits that come with a Home Loan will help you save money as well as get the property of your choice. If you haven’t applied yet, now’s the time to do so.
Easy repayment process
One of the best ways of reducing the interest charges on your loan is repaying the loan as soon as possible. However, while you’re at it, don’t forget to check if your bank has any foreclosure or pre-payment charges.
- You can use salary arrears, bonuses, or unexpected gains from an investment to make a partial prepayment. This will help reduce the principal amount and the tenure of your loan.
- You can increase your monthly payments to cover the principal amount of the loan faster.
- You can also opt for a Home Loan balance transfer to another bank or NBFC that’s offering a lower rate of interest. You need to complete some paperwork and your new lender will repay the outstanding loan amount to your previous bank. From thereon, you’ll be liable to pay EMIs as per the terms and conditions set by your new lender.
Secured closure
Once you’ve completed paying the loan amount plus interest charges, your loan account can be closed. But, you need to follow certain steps to be absolutely sure that there are no more liabilities attached to your Home Loan account.
- Make sure that all the documents are recovered.
- Retrieve security checks from the lender.
- Get an NOC from the lender stating the address of the property against which loan was taken, name of the applicant, and the loan account number.
- Ask the lender to update your new CIBIL score.
- Remove all lien associated with the loan.
- Get an encumbrance certificate that lists all the financial transactions that are made on the loan account.
- You can also get a clearance certificate from a lawyer to make sure there are no issues while selling the property.
Now that you have learned about the benefits that come with a Home Loan, you can go ahead and apply for one. However, sorting your finances wisely is vital before you apply for a Home Loan. Plan for contingencies as well so that you aren’t caught off-guard and strained financially. Research thoroughly and compare different Home Loan rates available in the market, before signing up for one.
