Here’s Why You Should Opt For a Home Loan Even If You Can

You want to buy a house and have saved money over the years to purchase one. The obvious option here would be to use the saved money and not opt for a loan, right? 

No, this is not always the case, always. Applying for a home loan offers many advantages, so even if you have money saved up, you should consider taking a loan to buy a home.

Why Get a Home Loan Even If You Have Money To Pay Upfront?

A home loan offers the following advantages:

Tax Saving

Home loan tax benefits are a vital advantage of a housing loan.

You can claim a deduction of up to Rs 2 lakhs (maximum) on the home loan interest under Section 24 of the Income Tax Act. To avail of this benefit, the borrower should be using the said property as a residence for themselves or their family. 

If you give the house on rent, 30% of the rental income and municipal taxes and the interest you pay are included in income tax deductions. This means the rental income becomes either zero or negative.

You can claim a deduction under Section 80C for the principal component of your EMI subject to a maximum limit of Rs 150,000. To claim this deduction, you should not sell the house in the first five years of possession.

Helps In Building Your Credit History

Your credit history includes the repayment details of all your loan and credit card dues. Credit agencies calculate the credit score based on your credit report. 

When you apply for a loan, prospective lenders look at your credit score to assess your creditworthiness; hence your credit score is a critical aspect for loan approval. 

If you repay your loan installments regularly, it will help you build your credit score, which will help you get loans at better terms in the future.

You Have Funds For An Emergency

Using all your savings to buy a house can leave you vulnerable during an emergency.

An emergency can strike anytime, unannounced; it could be a medical emergency or something else which requires funds to deal with it. If you have locked all your funds in buying your home, you may be unable to deal with the emergency or may have to depend on others for help. 

Applying for a home loan will ensure you do not have to use your savings to buy the house.

Choice Is Not Restricted

The cost of homes runs in lakhs and crores. If you want to use your savings to buy a house, your choice may get limited as the amount you have saved will be limited, and the cost of the property you like might exceed that. 

A home loan can help you purchase a house of your choice; you have more flexibility in selecting the home you buy or the renovations that may be required.

If a loan is not enough to buy a house, you can combine a loan with your savings to make a purchase. 

Things To Consider When You Take A Home Loan

When you apply for a loan, you need to keep in mind a few aspects so that you get the best deal and are fully aware of all terms and conditions of your loan:

  • Research well to compare the loan offers from various lenders
  • Do not overlook the hidden charges; read the terms and conditions well before signing the loan agreement
  • Find out about the pre-payment penalty, if any
  • Choose the loan term after careful deliberation; a longer tenure will increase your overall loan cost but make EMIs more affordable, whereas a short-term would mean higher EMIs but lower overall interest costs over the loan term

To Sum It Up

A home loan in isolation or with your savings can help you buy a house of your choice. Housing loans offer advantages like home loan tax benefits, an opportunity to build your credit score, keep the money for emergencies and allow more flexibility in choosing a home