People take home loans to buy the home of their dreams. It is a boon for people who don’t have enough money to purchase a home in a single payment. Although, a person having enough cash to purchase a house can too avail home loan to get benefits like improving creditworthiness, avoid locking funds and get a better home. The prices of properties are rising every passing day and that makes purchasing house more difficult. Hence, home loans become essential to make the purchase of your dream home possible. Home loans are probably the most significant loans taken by an individual considering the vast amount and long tenure. Hence it is important to know the key features that affect the home loan.
Here are a few features that every home loan buyer must know before buying a home loan.
1. Home loan interest rates – Home loan interest rates are of two types floating and fixed. This means if you opt for a home loan with floating interest rates, you will have to pay as per the changing market interest rates. While in case of fixed interest rates, you will pay whatever amount is fixed by the lending bank or financial institute.
2. Tax deductions – One of the most essential features of home loans is that it enables the borrower to avail tax benefits under various Sections of the Income Tax Act. For instance, a borrower can avail tax deduction for the repayment of the principal component under Section 80C of the IT Act. Or under Section 24 Act, the borrower can deduct tax on repayment of interest component.
3. Loan Transfer – Not much of people are aware of the fact that home loans are transferrable. For example, if you take home loan from a bank giving 12% interest rate and another bank is offering a home loan at 9% interest rate, you can transfer it to the second one providing lesser interest rate. You might have to pay charges to the bank from where you are moving.
4. Second-home purchase - Home loan facility is available not just to buy your first dream home but also allows you to buy a second one. You might want to buy a second home for whatever reasons naming to shift in a new place or for investment purpose. Home loans let you buy the second home or also to repair or renovate the existing house.
5. Eligibility – Home loans are readily available by almost all banks and financial institutes. All you have to do is fulfil their eligibility criteria. Factors like age and income are key eligibility criteria based on which loan is sanctioned. Mainly because it helps the bank to decide whether the person can repay the amount in time or not.
6. Prepay – You can always prepay your loan before the tenure ends. As per the directions by Reserve Bank of India, the borrower does not have to pay pre-payment charges for loans taken on the floating interest rate. You might have to pay penalty charges on pre-payment of loan taken on a fixed interest rate.
The process of applying for a home loan is much more simplified now as compared to the earlier application process. This is because now you can easily apply for a loan online. All you need to do is read the offer carefully before applying and fill in the details given in the online application form. The process of online application for a home loan hardly takes ten minutes. Also, in some cases, salaried employees enjoy a lower processing fee for applying online. You can also make maximum use of the online application by reading the different offers on home loans provided by various banks and financial institutes before applying. This will help you choose the best without compromising on your credit score.