A Home Loan is a secured loan product where the lender provides finances for the purchase or construction of a residential property. One can also avail a housing loan to buy a plot of land and construct on it. Home Loans are also issued to extend/ repair/ renovate/ alter a new or second-hand property. The Home Loan is taken by a borrower against the property to be bought. This is done by giving the banker a conditional ownership over the property i.e. if the borrower fails to pay back the loan, the banker can retrieve the lent money by selling the property.
Most lenders get the property valued independently and provide loans based on their estimated value. It is important to remember, however, that frequently their valuation is significantly lower than the actual cost and hence the requirement of the borrowers goes up. Home loans in Indian Banks are provided up to maximum of 80% (90% for loan amount below INR 30 lakhs) of the value of the house. Home loans are repaid using Equated Monthly Installments (EMIs) spread over a fixed tenure.
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- Nationwide increase in property rate
The increase in the property rate across the nation (both land and building) has made it impossible for people to buy a home by only using their existing savings. There are many hidden charges and processing fees in the process of buying a house. So instead of buying a house by spending every last penny of your savings and living in constant pressure of being financially insecure, you should definitely take a home loan.
- Large scale financial transactions
Buying a property involves large scale financial transactions. At the time of buying a property, a buyer does not necessarily have the entire amount to his/her disposal. Here the home loan covers the financial gap and helps you with a smooth financial transaction that is hassle free.
The interest portion of the EMI paid for the year can be claimed as a deduction amount 2.50 lakh under section 24(b). From Assessment Year 2018-19 onwards, the maximum deduction for interest paid on Self Occupied house property is Rs 2 Lakh.
- You don’t have to spend all of your savings
When banks give away home loans, they finance you up to 80%-90% of the original house purchase price. The borrowers are supposed to pay only 10%-20% of remaining amount. This helps to loosen the financial burden on your shoulders. This way you don’t have to spend all your savings purchasing a house.
