Buying a house? Get a home loan from bank
If you are a potential home buyer, the question you would be asking yourself is how to manage the funds for purchasing the house. While you may have saved a considerable amount of the total cost and can manage the rest through your borrowing from your friends, it is always the best option to go for bank loans.
You may be having a number of apprehensions about taking a home loan from the bank owing to the interest payable and the tenure of the loan. But to avail a loan from the bank to meet the fund requirement is always a safer bet than borrowing from sources like your friends.
Property verification
For one thing, borrowing from bank will save you the time and risk of verifying essential documents like property title and documentation. You do not have to put your complete trust in the broker in case of a colossal decision like purchasing a house. When you opt for a bank loan, the bank invariably scrutinises each and every detail pertaining to the property as they have to safeguard their money. A bank would furnish the loan only after it is fully assured as to where it has put its money.
Financial efficiency
Taking a home loan now would save your money. A home loan can be availed at an interest rate of 10.5% – 11%. If you take into account the escalating inflation rate, it means that the property prices will be pushed up further in the future, which is all the more true in case of Indian property market. Hence, availing a loan now and sealing the deal means that you would save money on the face of rising property prices.
Tax benefits
A home loan has lot of advantages and tax benefits. The mortgage payments by you will ensure that you get tax deductions on your total taxable income. There are two components of the equated monthly payment (EMI) made by you – the principal and the interest. Both these components will qualify for tax deductions. Under section 80 C of Income Tax Act, you can get a deduction for a maximum of Rs 1 lakh for the principal amount paid each year, irrespective of your tax bracket.
If you book a house that is still under construction and get partial disbursement of loan according to the stages of completion, you can still claim tax benefits. In that case, you may not be eligible for tax deductions till you get the possession of the house, however the interest paid can be claimed as deduction after receiving the possession.
Joint loan
If you want to buy a house jointly, you can opt for a joint home loan. The benefit is that both you and your partner, let us assume it is your spouse, will be able to take advantage of the tax benefits on the joint loan. The maximum tax deduction available to a single borrower is Rs 1.5 lakh and this applies to each borrower. Hence, the total deduction you can avail is Rs 3 lakh.
