For all the people who want to buy a home,availing a home loan is one of the most challenging tasks. Getting a home loan means paying a high rate of interest and giving monthly payments. The total EMI and monthly expenditure get profoundly affected by this loan.
However, there are several ways to pay less interest, and you would not be asked to compromise on your dreams. The solution to this is that you take a tenure for a longer period.
The EMI compounds to a significant portion of your monthly salary and impacts your monthly expenditure. However, experts suggest a simple and effective way to escape from high-interest rate without comprising on your dream home. The method is by taking a longer tenure on your home loan.
Traditionally, Indians are not in favor of taking loans for constructing or purchasing a home. However, with increasing disposable incomes and several financial provisions introduced by the government, the individuals are encouraged to buy a house. The trend is evolving with a growing number of takers for home loans, and people are opting for the home loan facility, but it is imperative that one delves into adequate financial planning.
A home loan requires careful contemplation and a probe into your financial details as the additional liability can impact your current lifestyle.
Higher loan eligibility
Financial institutions have an established criterion according to which a specified loan amount is granted to the borrower depending upon the eligibility. For determining the sanctioned amount, a person’s eligibility is assessed to gauge the repayment ability of the individual. It is assessed based on the disposable income of the individual. Therefore, for a shorter home loan tenure, the home loan EMI will be higher, and the borrower can avail a small home loan amount as compared to longer home loan tenure.
A higher home loan eligibility with a longer home loan tenure can enable you to choose a bigger home for your near and dear ones.
Income tax benefits
Different sections of the Income Tax Act govern the tax benefit on home loan and the borrower can claim them as tax deductions under different sections while filing an Income Tax Return.
Under section 80C, the amount paid as the principal amount of home loan is allowed for deduction. The maximum tax amount deducted under this section is Rs 1.5 lakh for the repayment of the principal amount. However, in short, home loan tenure when you are repaying the principal amount, the amount refunded is higher than those in the long-term loans. You will not be able to claim a deduction for a larger sanctioned amount unless you take a long-term home loan.
When you decide to have long home loan tenure, you get the flexibility to pay your payment. You, as a borrower, get an option to prepay the amount.
As you would not be charged for paying early or making a prepayment, the borrower can either pay the amount or due.
Also, even if you have taken the home loan for a fixed rate of interest, you still have an option to pay the total amount without paying any penalty. You also have an option to pay some amount every year so that you are free of debt before time.