There are few greater joys than owning a house. A house gives you emotional satisfaction and a sense of pride. However, with the skyrocketing real estate prices, it becomes difficult to buy a house from one’s savings. Which is why many people rely on home loans to buy their dream house.
But while taking a home loan, you must be aware of its nuances. If you are looking forward to buying a house, this guide on housing finance can help you.
What Is a Home Loan?
A home loan is an amount of money that you can borrow from a financial institution to finance your house. You are required to repay the loan amount by the end of predetermined tenure at a certain rate of interest.
Types of Housing Loans
- Home loan for house purchase – You can avail this loan to purchase your dream house, be it an apartment or bungalow. You can finance up to 70-90% of your property with this loan, provided you fulfil the eligibility.
- Home loan for construction – You can avail this loan if you want funds to construct your house. The lender disburses the loan amount in instalments according to the construction progress.
- Home Loan for extension/improvement – If you wish to renovate or repair your house, you can avail this loan offering. You can also use this loan to add an extension to your house, like a room or floor, etc.
Things to Consider while Availing a Home Loan
- Eligibility
Lenders require you to fulfil the various eligibility criteria while availing a housing loan. Home loan eligibility is based on your age, qualification, income, credit score, etc. Credit score is a vital eligibility criterion for a home loan. You must have a credit score of 700 and above to get your application approved.
- Documents
When processing your application, the lender gathers your details from the documents you submit. Therefore, it’s vital to submit accurate and updated documents required for home loan application. For a home loan, you will need to submit your identity and residential proof, income documents like ITR and all the property documents.
- Fine print
The loan agreement contains every minute detail like the terms and conditions, charges, default provisions etc. It also contains your rights and responsibilities, which you must be aware of. Therefore, you must read it carefully to avoid any surprises in future.
- Tax benefits
You can avail many tax benefits with a housing loan. You can claim tax deductions on the interest repayment up to Rs 2 lakh under section 24B of the Income Tax Act, 1961. Similarly, you can also claim a tax deduction on the principal repayment up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961. These tax deductions are available for all the co-applicants if you avail a joint home loan.
Bottom line
A housing loan, popularly called a home loan, is an easy means to fund your dream home. However, it involves a substantial amount of money and so, you must be careful while availing one. Ascertain your need and accordingly choose the lender by considering different options. And, choose a tenure that helps you repay the loan comfortably.
