Money Marzi

Home Loan

• Everyone has a dream of buying their own house. But with the immense rise in properties, such a dream remains a dream only for some people. This is where a home loan comes to the rescue.
• What is Home Loan?
  As the name suggests, a home loan is the amount of money an individual borrow from banks or other financial institutions after meeting certain loan eligibility criteria to purchase a residential or commercial property. The money borrowed has to be paid back to the lender in easy monthly installments (EMI) at a particular rate of interest. There are many banks and financial institutions that offer loans to help you buy or construct your dream home. Loans are also available for renovation or extension purposes.
  
• Types of Home Loans in India:
  
  Fresh Home Loan: The most common type of loan to avail for the purchase of any property. You can up to 80-90% of the property market price in form of housing finance.
  Loan Balance Transfer: If you are dissatisfied with your current lender’s service, you can transfer the outstanding balance of your loan to a different lender who offers a lower interest rate and better service. You can even look into the option of a top-up loan on your existing loan after the transfer.
  
• Important Factors To Consider When Applying For A Home Loan
  
  Principal: This is the amount of money you will be borrowing from the bank or financial institution.
  Duration: How long you will be paying back the loan. Depending on the nature of your expected income, you can select a period that suits you.
  Interest: The bank or financial institution charges interest in exchange for its money lending services. The rate of interest is dependent on the amount of the principal and the duration for which you will be repaying the loan.
  EMI Amount: You will be paying monthly instalments for the duration of your borrowing, until the end of the loan period. Each EMI is a combination of principal + interest. With each EMI, you will be paying back more of the principal and costs of interest will gradually reduce.
  
• Benefits of Home Loan
  
  Tax Benefits: A borrower can claim an Income Tax deduction of up to Rs. 1.5 Lakh under section 80C of Income Tax of India 1971 Act. While Section 24B of the Income Tax Act of India allows for a deduction of up to Rs 2 lakh on the interest portion. The income tax deductions are only available after the house has been completed. You cannot claim income tax deductions while the property is being built.
  Home Loan Balance Transfer: It gives you the benefit of a balance transfer to another lender with a lower interest rate & additional topup.
  No Need to Pay Rent: It enables you to buy your own home so there is no need to pay rent. It is better to pay EMI for your own home.
  
• What Happens If You Cannot Repay The Loan?
  When you take out a home loan, the bank or financial institution accepts the property you are purchasing as a security. This means that it retains the legal right to the property in the event of non-payment.
• Source: RBI Press Release

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