Home loans are an integral part of the purchase of homes. Many people due to high property prices are unable to buy houses without loans. The bank offers loans up to 80% of the property value as loans to the lenders. The loans can be taken for a maximum tenure of 30 years depending on the age of the borrower. The loans can be paid in equal monthly installments for a long span of years. And also an early repayment rebate can be availed from the bank for the early repayment. There are multiple banks in competition to provide loans to the lenders. The payment by full down payment of the property cannot help in availing tax benefits on the loans. Also if the property buyer is a first-time buyer then subsidy under the PMAY scheme cannot be availed. For the PMAY scheme, it is mandatory to avail of loans from the given list of banks for the subsidy benefits. If the property buyer has an excess of savings then, in that case, the funds can be invested in financial instruments like stocks & mutual funds which can help yield higher returns rather than ending up the savings in the purchase of the house.
Home loans help in improving the CIBIL score of an individual. There should be transactions of the credit to improve the CIBIL score of an individual. The higher the credit score higher are the chances of getting the loans approved. Also to avail credit card credit score is necessary. On timely payment of installments and in fact, repaying it early can help borrowers gain the benefit of lower repayment of interest towards the loans. Loans also help an individual stretch budget for the purchase of the house. Thus the flat buyer can buy a property of a higher amount for the purchase of the flat. The flat buyer does have to end up saving in the purchase of the property thus home loans help an individual help save money. The loans can be taken at an interest rate as low as 6.50% per annum. In the case of floating interest rates, the borrower can also expect to repay the further installments at even lower interest rates as the repo rates of the RBI are continuously falling. The borrower if charged higher interest rates can also negotiate the interest rates with the lender in case of good CIBIL scores.
Benefits of taking loans against the down payment:
- Helps in improving credit score:
The credit score of an individual may get improved in case of the better credit score of an individual. To improve the credit score an individual must avail frequent credits which can help the individual avail future loans or credit cards easily. Thus availing credits are good for improving credit score.
- Helps in tax exemptions:
The payments made towards the home loans are exempted towards the home loans. Section 80C is applicable for the payment of the principal amount towards the loans. Section 24 is applicable for the payment of the interest amount on the loans. And section 80EE is applicable for the tax exemption for first-time home buyers. Thus there are multiple tax benefits available for the exemption of income tax.
- Subsidy under PMAY scheme only applicable against loans taken:
The lower-income groups, economically weaker sections of society & middle-income groups are given a subsidy of Rs.2.67 lakh on the interest repayment of the loans taken. It is necessary to avail loans from the given list of banks for availing home loan subsidies for first-time home buyers.
- Loans available at attractive interest rates:
The borrower can avail of loans at an interest rate as low as 6.50% per annum. The loans interest rates are reducing continuously due to the falling repo rate of the RBI. Thus it is beneficial for the borrower to avail loans at attractive interest rates from the bank.
Hence due to multiple benefits on home loans, it is always advisable for the property buyer to avail loans rather than going for down payments as the loans are available with minimal documentation and at an attractive interest rate for a longer span of time. Also, tax exemptions can be gained under various sections for the benefit of a home buyer.