Top 5 Features of a Home Loan
Majority of the aspiring home buyers in India rely on getting a home loan to get the necessary funds for buying their dream home. With the easy availability of home loans, buying a home has become much easier than before. It is the most financially feasible way to get the funds as you need not use up your lifetime savings to purchase your home. In addition, when you apply for a home loan, you get the flexibility to repay the amount over an extended period in smaller instalments known as EMIs (Equated Monthly Instalments).
If you are looking to avail of a home loan, you must be aware of the top features, which are discussed below:
- Two types of interest rates
First and foremost, home loans come with two types of interest rate – floating and fixed interest rate. In floating interest rate, the rate of interest keeps fluctuating throughout the loan tenure based on the existing market condition and the economic factors. Whereas, in fixed interest home loan, the rate of interest is fixed at the time of availing the loan and it remains fixed throughout the tenure.
Many experts recommend availing home loans with floating interest rate as it tends to be a few points lower than the fixed rate. Also, with floating rate, the overall interest payment is much lower in the long run compared to the fixed rate home loan.
- There are different types of home loans
Generally, most people apply for a home loan to purchase a new home or an under-construction property. This is called a home purchase loan. However, there are different types of home loans available in the market.
You can avail of a home loan to purchase a plot or piece of land where you want to build your own home. This is called plot loan. You can also avail of a home loan to carry out repair or renovation works in your home. This is called home renovation or home improvement loan. You can use the amount to fund the cost of painting, changing the interior décor, redoing the flooring, etc.
- You can avail tax benefits
Another significant feature of the best home loan is that it is an excellent tax-saving instrument. You can avail attractive tax benefits on home and reduce your annual tax liability. You can get a tax benefit up to Rs. 1.5 lakhs on the repayment of the principal amount under Section 80C of the Indian Income Tax Act.
Additionally, you can avail of a tax benefit up to Rs. 2 lakhs in a financial year on the interest repayment of the home loan under Section 24 of the IT Act.
- Balance transfer facility
If you are unhappy with the services of your existing lender, or if they charge a higher interest rate than other lenders, you can transfer your loan to a different lender. This facility is called home loan balance transfer or home refinancing.
Home loan balance transfer allows you to reduce the repayment burden by repaying the outstanding amount at a lower interest rate.
- Eligibility decides the loan amount
Generally, the lenders decide the maximum amount you can borrow based on their assessment of different factors including, your credit profile, income, repayment capacity, age at the time of applying for the loan, etc.
Applying for a home loan is a simple process. Follow the steps carefully and you can be sure to have a hassle-free borrowing experience.