Benefits of a Home Loan

According to statistics released by the Reserve Bank of India, the housing market has been witnessing a constant rise in prices since the first quarter of the financial year 2010-2011. The Residential Property Price Index (RPPI) saw a stark increase of 61% from the first quarter of the financial year 2010-2011 to the third quarter of the financial year in 2014-2015. With 78% RPPI growth, Jaipur became the city with the highest growth rate, whereas the lowest growth rate of 40% was recorded in Chandigarh and Hyderabad during this period.

The inflation in house prices saw a slight decrease in India since the last quarter of 2014-2015.The annual house price inflation moved slightly upward in developed countries like the US and UK since the last quarter of 2013-2014, while in Asian countries like China, Indonesia and Malaysia, the inflation rates went down during the same period.

This constant rise and fall of rates in the market is making it even tougher for the common man to own his dream house. That's where banks and housing loans come into the picture to help you fulfill your dream without having to worry about the market volatility. Here’s a look at some of the benefits of taking a home loan, especially if you evaluate the amount you apply for using a home loan EMI calculator.

Advantages You Stand to Gain

1. Low Interest Rates Buying your dream home with a loan is a long-term decision, which can have a financial impact on you for over a period of at least 10 years. During this time, the interest rates are bound to go through various up and down cycles. Therefore, it can lead to situations where interest rates fall, allowing you to prepay the whole loan and own that home faster than you expected. For example, the interest rate in 1995 was 18%, as compared to 7.5% in 2015-2016. Banks often provide lower interest rates to new borrowers. So, when there is a rise in your existing home loan rates as the per interest rate cycle, pay 0.5% of the outstanding loan as processing fee and avail the rates offered to new borrowers. 
2. Tax Benefits According to Section 24(b) of the Income Tax Act of 1961, you can claim a tax deduction of up to Rs. 1.5 lakhs towards the total interest payable on a home loan. According to the newly added Section 80C, along with the 80CCE of the Income Tax Act, repayment of the principal amount up to Rs. 1 lakh on your housing loan can be given as a deduction from the gross total income under certain prescribed conditions.

So, when you decide to go ahead with a home loan, make sure to use the home loan EMI calculator to find out the amount you will have to pay every month. This will give you the freedom to plan your financial matters well in advance and avoid any rude shocks later on.