Constructing or purchasing a house, flat, or plot of land requires enormous funding. Therefore, it is often an endeavour that people make with the help of a financial institution by applying for a home loan. This loan provides substantial funds payable over a long time at a lower interest rate than any other loan form. However, before taking up such a massive loan, you should be clear about all the aspects of a home loan and what the financial institution considers before giving you the loan to ensure the best terms and conditions. Moreover, understanding the components of this loan will enable you to make the right decision.
What is a Home Loan?
It is a secured type of loan that a banking institute, non-banking institute or housing finance company gives to a borrower against pledging the property for a specified period. The lending institute will charge an interest rate on the loan amount, and the borrower has to pay a monthly instalment with the interest and principal amount as part of the EMI amount. Best home loan offers to give the maximum loan amount at
What are the Various Types of Home Loan Interest Rates?
Different financial institutions give the borrower the option to choose the interest rate applicable to the loan, which is as follows:
1) Fixed Home Loan Interest Rate: You should opt for an interest rate that does not change throughout the loan tenure if there is a prediction that the Reserve Bank of India might increase the Repo rate in the future, which will affect the real estate market. The fixed interest rate will shield you from the increasing interest rates as your cost of borrowing will remain the same.
2) Variable or Floating Home Loan Interest Rate: If you foresee a decrease in interest rates in the home loan market, it would be best to take the floating interest rate as your cost of borrowing can reduce significantly in the future.
3) Hybrid Home Loan Interest Rate: Some lenders even allow you to choose a combination of fixed and variable interest rates. This option would be best for you as you can switch between them per the market conditions to reduce your borrowing costs of the house loan accordingly.
Advantages of Choosing a Best Home Loan
Here are some of the benefits why you should go for the best loan for a property:
1) Financial Assistance:
Since purchasing a house or constructing one requires a lot of financial expenses, getting assistance from a financial institute will tremendously reduce your financial burden. It will even help you to buy what you are looking for or construct the house as per your taste without making any compromises.
2) Get Lower Interest Rates:
Interests on loans for properties are lower than other kinds of loans like personal or car loans. Therefore, taking a loan from professional and registered financial institutes ensures that you get the best interest rate that is very low and reasonable. Consequently, it helps you to take a considerable amount of money on a loan to build the home of your dreams at a low cost.
3) Enjoy the Benefit of Tax Exemptions:
When you apply for a home loan, you automatically get qualified for tax exemptions under the income tax act on your taxable yearly income. The tax benefits are for the interest you pay and your loan’s principal amount. You fall under section 80C and section 24B of the income tax act and can claim the benefits yearly. Additionally, if you are buying a house for the first time, you can also claim a rebate under section 80EE or 80EEA as applicable.
4) Choice of Interest Rate Type:
Many money lending institutions will give you the choice of selecting the type of interest you want while applying for your loan. This choice will provide a great advantage to you as the control of determining the cost of borrowing is in your hands. In addition, you must ensure that you study the future of the real estate and home loan market conditions before deciding on the interest type.
5) Long Repayment Duration:
A home loan online apply process lets you choose the time you want to take to repay the loan back. For example, loans for a property purchase or construction give up to 30 years based on your eligibility which is a very long repayment duration. Since the amount for such a loan is significant, you would require sufficient time to repay.
6) Benefit of Due Diligence done for Your Property:
There are many cases of people buying a property with their own money and then discovering that the property has some dispute. This negligence does not occur when you take a housing loan through a financial institute, as they have an expert legal team with them. This team will do the due diligence on the property documents to identify and ensure a clear property title before approving the loan amount. Therefore, this procedure will benefit you in buying the right property.
7) Advantage of a Top-Up Loan in the Future:
Another benefit of a housing loan which many people are unaware of is the possibility of getting a top-up loan on your current loan after a specified period. This additional loan usually has similar terms as the housing loan, which means you get low-interest rates and longer repayment duration. Therefore, if any urgent financial need appears, taking this loan won’t require you to take a personal loan at higher interest rates and increase your cost of borrowing.
A home loan is something that many people opt for nowadays as it provides excellent assistance in times of buying or constructing a house. Moreover, the benefits of a housing loan are excellent for managing your finances more efficiently. In addition, it can provide you with tax exemptions which is a significant saving for you and your family over the years. Therefore, take time to study the nuances of a housing loan and make it work to your advantage by choosing the right one with the best terms and conditions.