With a home loan, you can buy the house of your dreams and repay its cost comfortably over the tenure. However, as convenient as it is, availing a home loan could be a complicated process. The different procedures and paperwork can look confusing, making way for various queries and doubts. Experts opine that you must clear all your queries before applying for a housing loan to save yourself from any inconvenience in future.
Here are some home loan queries answered below to clarify your doubts.
Can You Claim Any Tax Benefits on Home Loans?
Yes, housing loans can help you claim tax deductions from your income. You can claim a tax deduction of up to Rs 1.5 lakh on principal repayment under section 80C of the Income Tax Act, 1961. Similarly, you can also claim a tax deduction on the interest repayment of the home loan of up to Rs 2 lakh from your income under section 24(b). If you are buying your first home, you can claim an additional deduction of Rs 50,000 on the interest repayment under section 80EE.
What Should You Choose: Floating Interest Rate or Fixed Interest Rate?
If you are availing a short-term loan and wish to have a fixed budget for the entire tenure, you can opt for a fixed interest rate loan. However, you must know that fixed interest rates are slightly higher than floating interest rates. You can also opt for a fixed interest rate if the home loan interest rates have dropped currently, and you want to pay the same rate for the entire loan. On the other hand, a floating interest rate is better for a longer tenure when you expect the interest rates to fall shortly.
How to Apply for a Home Loan?
You can apply for a home loan either online or offline. Through the online method, you can visit the lender’s website and fill the application form after checking your eligibility. Once your application form is accepted, you would be asked to furnish the documents and complete the further verification process. In the offline method, you would need to visit the lender’s branch to fill the application process and submit the documents.
How Can You Check Your Home Loan Affordability?
You can use a home loan EMI calculator to check your affordability. It is best to do so before you apply for a housing loan. With an EMI calculator, you can experiment with the different home loan interest rates and tenure to find the most suitable loan EMI for you.
Should You Opt for a Short Tenure or Long tenure?
If you can afford it, you can opt for a short tenure to close the loan faster. However, it would mean that you would have to pay a higher EMI. If you opt for a longer tenure, the EMI would be smaller, but the loan would stretch for years and increase your interest outgo and the total cost of borrowings.
A home loan is a long-term commitment that can significantly affect your finances. Therefore, you must gather adequate knowledge about its various aspects before you sign below the dotted line on the loan agreement.
