Applying for home loans makes sense whether you want to buy a property to live in or invest in for two reasons. One benefit is that you’ll have extra cash on hand for any necessary expenses or property damage. Additionally, you might have some cash to put to use elsewhere.
What are home loans?
Home loans are the kind of loans available for buying homes or building them on property you already own. You can apply for a home loan to renovate your current residence. These can be secured loans since you can use your home as collateral. The interest rates on loans against property are lower than those on other housing loans.
Equated Monthly Installment, or EMI, is a method of repaying a house loan where you make a set monthly payment. The amount is based on the loan size and interest rate.
Factors affecting eligibility of home loan are
- Income and repayment capacity
- Financial profile
- Credit history
- Credit score
- Existing debits/EMI’s
- Number of dependents
As soon as you decide to begin building or buying a home, you can apply for a home loan. Whether you have started construction or decided which home to purchase is irrelevant. You can even apply if you’re an Indian non-resident.
Various loan types according to home loan rates:
Fixed interest rate
For the duration of the loan, the interest would remain constant.
Floating interest rate
Depending on the condition of the market, the interest rate may fluctuate occasionally.
Combination interest rate
This kind of loan has both fixed and partially floating interest rates.
Benefits of a home loans
You may deduct up to two lakhs of interest payments made throughout a year from your taxable income under sections 80c, 24(b), and 80EEA of the Income Tax Act. Additionally, up to Rs. 1.5 lakhs of the principal repayment might be deducted. However, in order to obtain these claims, you must either finish the construction or buy a home that is ready to move into.
Growing your capital
Home loans are typically preferable because you can invest the remaining funds in a variety of financial instruments. The profits on these investments are typically more than the interest on a home loan.
If you apply for a home loan, you will have more cash. This is something you can use in an emergency. Otherwise, if you spend all of your savings on a house, you would need to take out personal loans. And the interest rate on this loan could be greater.
When you apply for a house loan to buy a property, banks will check all the relevant information. As a result of the bank’s verification, you may be sure that all pertinent documents are accurate.
When to apply for home loans?
When you have no other credits
If you don’t have any other debts, such as a student loan, vehicle loan, etc., you won’t have many obligations. This will lessen the pressure. If you already have unpaid loans, the loan interest rates will also be very high.
When you have adequate payments for a down payment
The full loan amount might not be available to you. The sum is based on a number of variables, including age, income, etc. The down payment you make before your loans are approved is the remaining sum. So only apply for a loan, if you have enough money saved up for a down payment.
When you have long work experience and good pay package
Your ability to repay the loans with the least amount of stress depends on your length of employment and your compensation package. Furthermore, you’ll get a bigger loan with a lower interest rate.
When interest rates are low
To keep up with the most recent interest rates, look for bank adverts. They frequently change. As a result, you will be aware of when interest rates are at their lowest. If you apply for a loan at that time, the EMI will be lower.
In conclusion, house loans are advantageous if you want to save money for future purchases or unexpected expenses. In this manner, you can avoid taking out a new loan with a higher interest rate. However, be sure to apply when interest rates are low, don’t have any other credit, and have enough money saved up for the down payment. For instance, the interest rates on loan against property are consistently low.