Loan… It’s one of those terms that you may have been instructed to avoid as a child. Everyone appears to be either “loan-free” or “drowning in loan,” and these labels encourage us to assume that taking out a loan is a bad idea that should be avoided at all costs. In truth, the vast majority of loans we see around us are bad, and they may even ruin people’s lives, but when utilised properly and measured better, the loan can be a very valuable tool.
Here are a Few Reasons Why You shouldn’t be Afraid of a Home Loan:
A. Capital Gains:
Real estate has been one of the few asset groups in India that have regularly provided substantial capital gains (the increase in value of your property over time). This implies that by the time you’ve paid off your mortgage, your home will most likely be worth a lot more than you paid for it. Many multi-millionaires and even billionaires have made their fortunes in real estate, and a home loan can help you join that exclusive club (E.g. Donald Trump)
B. Freedom & Accomplishment:
Debt management done correctly can set you on the road to financial independence in the future. A home loan is one of the easiest forms of debt to handle and sustain; it will provide you freedom and control over your own domain, where you can create an investment, a home, and a family.
C. Low Rates, Long Tenures:
Home loans have lower interest rates than other forms of loans, and the payback terms, or ‘tenures,’ are often as long as 15 to 20 years or more. This gives you a lot of options and allows you to construct a stable foundation for your future.
D. You’ll Be Paying Yourself:
When you take out a home loan to pursue your dream of homeownership, you are essentially paying yourself for the duration of the loan. This is due to the fact that each payment you make will contribute to your rising home equity. Otherwise, renting a place to reside means paying someone else your hard-earned money for the right of living on their land, with no additional advantage or savings for you.
So, you should apply for a home loan as soon as feasible. You can pay it off sooner and become a more disciplined investor if you take it out early. Here are a few advantages to taking out a home loan when you’re young:
A. Grow Your Capital
The cost of real estate properties in India has constantly increased over the last few decades. Many experts believe that the capital appreciation of real estate holdings has outpaced the interest you pay on your mortgage.
For example, if you take out a ten lakh rupee loan at a ten percent interest rate and the value of your property rises by 20% at the end of the loan period, the capital appreciation will be greater than the interest you pay. Capital appreciation will allow you to cover expenses while still making a profit on the sale of the property.
B. Make Savings Compulsory
If you’re unsure whether a home loan is beneficial or bad, you should realise that it has both positive and negative aspects. It’s entirely up to you how you handle it. It might be difficult to resist the urge to spend when you have cash on hand. If you are sure in your ability to earn a consistent income but are unable to save money, a home loan is the greatest approach to save.
You might consider the money you pay toward the EMI as a saving rather than an outlay. This is because once you have paid off the loan in full, you will own the house, which will have improved in value at the end of the loan term.
C. Safeguard Property
Purchasing a home is a once-in-a-lifetime investment, and you’ll want to be sure the property you choose is free of legal difficulties. This is where obtaining a house loan can be really beneficial. When you apply for a home loan, the lender will do a thorough investigation of the builder’s trustworthiness as well as the property itself. They will examine all of the property’s paperwork to confirm that the structure is lawful and that the builder has gotten all of the necessary clearance certifications from the local authorities.
Moreover, the lender will make certain that the property is free of any legal issues. As a result, with the lender handling the paperwork, you won’t have to go through the time-consuming process yourself, and if the lender accepts the loan, you’ll know the property you want to buy is secure. So, at an early age you can save yourself the trouble and trust Banks to do the due diligence for you.
D. Increase Your Loan Eligibility
Home loan eligibility criteria differ, depending on your income and existing debts. However, your CIBIL (Credit Information Bureau Limited) score will immediately grow when your home loan is in effect, and lenders will classify you as a safe and responsible borrower if you continue to return the amount diligently or if you have already repaid the loan in full. A good CIBIL score will help you in enhancing your loan eligibility. You might take advantage of this to obtain a loan with a lower interest rate.
E. Save Lacs On Income Taxes
Keep in mind that income tax benefits on a home loan are huge. If you used a mortgage to secure a loan, you may be able to deduct both the principal and the interest portion of the repayment. You can claim a deduction under Section 80C for the repayment of the principal component of your house loan. The highest amount that can be deducted in this case is Rs. 1.5 lakhs.
You can claim a deduction under Section 24B for the interest component of the repayment. You can claim a maximum deduction of Rs. 2 lakhs for interest repayment. In terms of determining your overall annual tax obligation, these deductions might be significant. These tax incentives on home loans are not available if you buy a house without taking out a loan.
Conclusion
The obligations of a person in his twenties differ from those of a person in his thirties. Because there are fewer dependents, a youthful house loan borrower can benefit from a larger fixed-obligation-to-income ratio (FOIR).
Moreover, buying a home isn’t simple, but putting it off may not be a good idea either. Yes, your income will rise in the future, but so will your expenses as a result of increased financial obligations. So, educate yourself and learn how to effectively handle your finances. You may have to make some sacrifices as well, but it will all be worth it once you have those desired keys.
And if you’re still undecided about where to put your money, here’s a great option: a property that won two prestigious real estate awards in its first year itself.
Zen Estate, Kharadi
Zen Estate is a welcome change from the usual tight flats, lack of open space, and lack of essential amenities. It’s a spectacular residential project that spans a significant stretch of the Kharadi-Mundhwa road and features spacious apartments, world-class facilities, and acres of open space for the imagination to run wild. It’s a green neighbourhood with similarly great amenities, and it caters to the needs of every 2 BHK and 3 BHK Flats in Kharadi.
