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Five advantages of a Home Loan

5 MinsApril 28, 2019

A home loan comes with several advantages that help buyers prosper in the long run

Owning one’s home is every Indian’s dream. For some, it provides a sense of security. For others, it’s a sense of accomplishment and success. But it is also a big decision when it comes to finances. Real estate prices in India go up nine out of 10 times. Buying a home is the single largest financial decision a family takes during their lifetime. More often than not, buyers turn to loans to help them get their dream home.

Home loan

While deciding to take a home loan can be a tricky decision, there are also several benefits of taking a home loan.

  1. Owning a long-term appreciating asset:
    According to data from the Bank of International Settlements (BIS), barring a few blips, property prices have been appreciating uninterrupted for the last decade. Given that over a third of India’s population is young and will soon aspire to own homes, most experts believe that in the long term, property prices in India will continue to appreciate. This makes buying a home one of the smartest investments that you can make right now.

  2. Tax Benefits:
    A home loan comes with good tax benefits. Under section 24 of the Income Tax Act (ITA), homeowners can claim a deduction until a maximum of Rs. 2 Lakh on their home loan interest for a self-occupied property. If you rent out the property, exemption on interest is capped at the lower of the two—a) Rs. 2 lakh, or b) actual interest paid for all properties owned by a taxpayer. Apart from this, under section 80C of the ITA, one can also claim a deduction of Rs. 1,50,000/- on principal repaid.

  3. No Lock-in of Funds:
    It’s no secret that a home in India is expensive. Even if you do have the money to buy a home without a loan, it’s not advisable to do that. Emergencies can pop up any time, and it hurts if a huge sum of your cash is locked up in real estate. While a home is a great investment, it is difficult to liquidate it on short notice. Another point to keep in mind is that a home does not give you the same kind of returns as stocks or mutual funds. Extra cash means you can diversify your investments while keeping them liquid.

  4. Improves Credit Score:
    Paying off your EMIs (equated monthly instalments) on a home loan is a great way to improve your credit score and credit-worthiness. If you have a good record on your home loan, it becomes easy for you to finance other purchases like car loans or your child’s student loan.

  5. Lowest Cost Debt to Create an Asset
    The rate of interest on a home loan is cheaper than any other loan in India. It's easy to get a home loan because it is secured against an asset. A home loan is the most cost-effective way of funding a long-term asset.

Disclaimer: This article has been authored by The Source, a Mumbai-based content creation and curation firm. Axis Bank does not influence any views of the author in any way. Axis Bank and The Source shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.