Home Loans in India: 5 Critical Aspects to Consider

Home loans in India can help us ensure that we have a roof over our heads. After all, we all need one, right?

At the same time, there are a lot of things to consider when shopping for a home loan in India. This article delves into some of those key aspects.

1. Home Loans in India Can Serve Multiple Purposes

There is a misconception that home loans in India are only for those considering a new home purchase. That is not true. You can get a home loan in India for a variety of home-related requirements, including but not limited to:

  • Land Purchase – When you may only be considering the purchase of land, not necessarily a built-up home. This land purchase may, in turn, be for various reasons including purely for investment purposes (possibly constructing a house on that land at a later date or reselling the land subsequently as-is).
  • Home Improvement – Your existing home may be in a state of disrepair with significant funds required to make it habitable. These funds can be obtained with the help of a home loan.
  • Home Expansion – Even in situations where you might be considering expanding the area of your home, you could opt for a home loan.
  • House Construction – When you already have land but do not have funds for constructing a home on that land, you can get a home loan that will help you fund the construction of your home.
  • Bridge Loan – This is a unique home loan designed to facilitate a new home purchase when considering the sale of your existing property. Essentially, it might take time to sell your current property while a hot new property might be out there for the taking. Thanks to a bridge loan, you can buy that coveted new property at the earliest, and then pay off the loan once your existing property is sold.

2. Banks Assess Creditworthiness Thoroughly

Since home loans typically involve large sums of money repayable over a prolonged period of time, banks assess creditworthiness very thoroughly. So you really must be prepared for all the checks and balances that banks will rigorously go through before approving you for a home loan.

A high CIBIL score will only be a part of the entire mix. Banks will especially be interested in knowing about your ability to pay the consistent home loan EMIs over a long duration, for which a sustained income is essential.

3. Shop Widely for your Home Loan in India

Your home loan is quite likely to be one of your biggest financial outlays over a long period of time. Considering its criticality in ensuring a roof over your head, and that of your family, make sure that you assess all your options thoroughly.

Home Loans in India
Your Home Loan may well be the biggest financial commitment of your life, so assess the decision thoroughly.

With the large amount that you will borrow and the even larger sum that you will repay over the tenure of your home loan, even a small percentage difference in interest rate will actually have major implications. Saving even a small fraction of a percentage on your interest rate has the potential to save you thousands over the span of your loan period.

4. Ideal Balance between EMI Amount and Loan Tenure

Too many home loan shoppers in India excessively focus on one of these two factors when they should be looking at an ideal balance between the two. For instance, simply looking at a longer tenure in order to have a lower EMI is not enough; over that prolonged period, you will only end up paying even more money.

Therefore, a suitable mix or balance between the two is really important when considering home loans.

5. Tax Benefits

Remember that taking out home loans in India qualifies you for various tax breaks. So do consider this aspect as well. With a home loan, you will be on the way to creating an asset of your own, while tax savings will at least partially offset the additional expenses you are incurring. Home loans do not only have to cost you money. You can also use home loans for your own tax benefits.

Conclusion

The decision to get a home loan is a big one. The key aspects highlighted above can help you make the most of your home loans in India. Remember to consider these 5 tips before you choose the right home loan for you.

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