Meaning and benefits of home loan

HOME LOAN: MEANING AND BENEFITS

“It’s my home” this is the proud line which we love to say. We always dream for owing a house it include financial and emotion values. Home is a place where we spent quality time with our family and dear ones. To realize this dream you  need to do lots of home work .Though it is a complicated process but with proper knowledge you can get the home loan. 

Home loan or house loan

Home loan is a secured loan which is acquired from financial institution to buy a house. Banks or private lenders offer loan against commercial or personal property. They give ownership to the borrower which is subject to terms and conditions, in case if they are not meet out by the borrower or if they fail to repay in future, lenders can recover their money by selling the secured property. Home loans have fixed or floating interest rates and other terms also. Home loan financing is also known as mortgage loan.

Why should go for home loan 

Buying a house require huge amount of investment which can make big dent on your pocket. But with the help of home loan you can reduce it and can meet out your monthly expenses conveniently with affordable monthly EMI. And if you add a co-partner (wife or any other family member) you can make maximum benefits of house loan. You can adjust your EMI and interest rate by choosing the different term. Long term generally means less EMI per month which is said to be comfortable and convenient, but you have to pay a bit more interest amount. However,if you  can afford to repay in less time than go for short term as it will reduce your interest amount.

Other advantages of house loan are that it saves your monthly rent and provides you tax benefits as well.

As per section 80C read with section 8CCE of the income tax act 1961 the principal repayment is up to rupee 1 lakh on your home loan will be allowed as deduction from the gross total income subject to fulfillment of prescribed conditions let’s take an example

Suppose your income is 6,50000 p.a

Principal repayment for the same year Rs 110000 and interest payable for the year 160000

Total deductions allowed rs2.5 lakh (1.5 lakh towards interest payable and 1 lakh for principal repayment of the loan)

Thus, your taxable income will reduce to 4lakh (6.5 lakh-2.5 lakh)