Buying a house is one of the biggest achievements most people want to fulfil in their lifetime. Given the ongoing debate on renting vs owning a house, many finance gurus have suggested that renting is an economical option.
However, practicality can sometimes take a back seat when it comes to fulfilling aspirations. Owning a house is a dream passed on to middle-class Indians from a very young age.
The answer to the question "Why should you buy a house?" is a simple "Why not?". Buying a house has become a lot simpler as banks are providing home loans at very competitive interest rates with several facilities to make your home ownership journey simpler.
Let us look at the top 10 benefits of buying a house.
Ten advantages of Home Loan
1. Owning a long-term appreciating asset
One of the most significant benefits of buying a house is the opportunity to own a long-term appreciating asset. Unlike renting, where you're essentially paying someone else's mortgage, homeownership allows you to build equity over time as the value of your property appreciates.
2. Tax benefits of housing loan
To incentivise home ownership, the Government of India offers tax benefits on both the principal and interest repaid on home loans. Section 24B of the Income Tax Act permits a deduction of up to Rs. 2 lakh on the interest component.
3. Lower home loan interest rates
When you take a home loan, you pay relatively lower interest rates than other debt forms, such as personal loans or credit cards. Lower monthly EMIs (compared to other debt forms) helps save money over an extended period.
4. No prepayment charges
Many loans impose prepayment penalties, but a floating-rate home loan does not incur such charges. This means that whenever you have extra funds available, you can use them to make partial payments towards your home loan without facing any penalties, reducing your overall debt.
5. Balance transfer facility
Since a home loan is a substantial loan, banks offer many benefits to the lenders. One such benefit is the balance transfer facility. Under a home loan balance transfer, you can move the outstanding balance of your existing home loan from one lender to another. This choice becomes attractive when you come across better interest rates or more favourable terms and conditions offered by another lender during your loan tenure.
6. Repayment tenure
A home loan has a long repayment tenure, spanning up to 30 years. This extended tenure offers borrowers the flexibility to reduce the burden of monthly EMIs. By stretching out the repayment period, borrowers can adjust their EMIs to more manageable levels.
7. No lock-in of funds
It is advised to opt in for a no lock-in of funds when taking a home loan and opting for an OD account. It is a precautionary measure in case any unforeseen emergencies may crop up. If you exhaust all your savings on buying a house, you could be in a challenging situation during such emergencies. Hence, you will be able to access your home loan funds.
8. Improved credit score
Timely repayment of your home loan instalments can significantly improve your credit score over time. A higher credit score enhances your creditworthiness and makes it easier to qualify for future loans and obtain favourable interest rates.
9. Low-cost debt to create an asset
Compared to personal loans or credit card debt, a home loan typically offers a lower cost of borrowing and creates a valuable asset. By taking leverage, you can maximise your returns on investment.
10. Due diligence
Finally, buying a house requires thorough due diligence. It includes doing thorough property inspections, title searches, and legal documentation. While this process may seem daunting, it ensures that you make an informed decision and protects you from potential pitfalls down the road.
Also Read:Ways to choose the right Home Loan for your needs
Bottom line
Buying a house offers numerous benefits beyond mere homeownership. From building equity and enjoying tax advantages to securing lower interest rates and improving your credit score, purchasing a house is a wise investment that can yield substantial long-term returns.
By understanding these benefits of home loan and conducting thorough due diligence, you can make the most of your homeownership journey and achieve financial security for years to come.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
