Owning a place which you can call just your own is something many aspire about. It is not uncommon to avail of a home loan to meet your dream of becoming a homeowner. We often look at factors such as interest rates, EMIs, processing charges etc., before finally applying for a home loan deal. Note in case if you are a new home loan seeker seeking a good deal on a home loan, avoid opting for the very first lender you approach. Ensure to compare amongst different lenders before you zero on the final one. For instance, suppose if Kotak Mahindra Bank Home Loan provides you with an offer initially, while you must consider the offer, do not go for it. Keep this as a benchmark to compare with other home loan deals.
Read on to know some of the crucial things about home loans that you must know –
Not all are eligible to place an application for a home loan jointly –
People often avail of a joint home loan to be eligible for higher loan proceeds. While most individuals – like married couples, children, parents, and brothers are permitted to avail of a home loan together, many banks hardly extend this facility to everyone.
Have an idea that banks usually do not provide loans to friends, sisters, and unmarried couples – yes, this is true.
Your home, you loan –
Now here is a situation that you may find yourself in. Suppose you and your spouse just decided to purchase a home together. And you have sufficient funds to cover up half the home cost and prefer not to avail of a home loan. Your spouse, however, requires availing of a loan to repay their share. Do you know that when your spouse applies for the home loan, the bank will ask to be a co-applicant also?
As you may even be one of the homeowners, you also will require becoming the home loan’s co-borrower. Even while you are funding in half the loan amount from your own pocket and do not require a loan technically, the bank will require you to be a co-borrower. In case the flat or home is registered in 2 or more individuals’ names, banks need all the property co-owners to be the home loan’s co-borrowers.
Women power –
Do you know that if you are a woman, you often get entitled to a lower rate of interest when you place the application for a home loan, may it be a 15 Lakh Home Loan EMI or a higher amount? Yes, this is true. So, what you can do is if you are not a woman and looking to get the benefit of a lower interest rate on a home loan, then you can add your mother or wife as a home loan’s co-applicant. However, remember that women will require being the primary home loan applicant to benefit from a lower home loan interest rate.
Tax benefits –
When it is about tax benefits, a home loan endows you with great benefits under not just 1 but 2 sections of the IT Act! That is correct. When you avail of a home loan, you can avail of home loan tax deductions as per Section 80 C for the principal amount of your home loan for up to Rs 1.50 lakh and as per Section 24(b) on the interest component for up to Rs 2 lakh. Additionally, if you avail of a joint home loan, both the applicants can claim tax deductions. Thus, this takes the overall deduction amount to up to Rs 3 lakh for the principal constituent and Rs 4 lakh for the interest constituent.
Give some and take some –
Are you aware of banks that endow you with a home loan of just up to 80 to 90 per cent of the home value? The rest of the 10 to 20 per cent requires being paid just by you. Thus, if you are looking to invest in a home, begin saving now!
How fixed exactly are fixed interest rates?
When you place the application for a home loan, you can choose either to have a floating or fixed interest rate. However, do you know that when you avail of a fixed rate, it is usually fixed for a specific number of years and not for a while repayment loan tenure?
Read on your loan agreement with full concentration to see the reset clause on the interest rate of your home loan. Home loans are mostly floating and fixed interest rates. In a mixed interest rate, the interest rate for the initial few years is fixed, which later changes to a floating interest rate.
Interest first and then principal constituent –
Do you know that when you begin to make your home loan repayment, you first repay your interest constituent and just then the principal constituent? Thus, in the starting years, the interest constituent is high. For instance, if you are looking to avail of a home loan equaling Rs 30 lakh for twenty years, at a rate of interest of 10 per cent, the EMI constituent would equal Rs 28,951. In the beginning years, the interest constituent will be equivalent to Rs 2.48 lakh, and the principal constituent will equal Rs 41,022. Thus, if you are planning to make your home loan prepayments, ensure to do so in the starting years so that you can save the maximum interest constituent, as the interest component in the initial years is extremely high.
Any food for thought? Knowing everything linked with a home loan may seem a task but hunting for the correct one and comparing across the loan providers, and applying for the correct one is not that difficult. For this, you can use the home loan calculator, which is the best tool to search for lenders as per your suitability and preference. Here in this calculator, you just require inputting the required values as per your budget, and the suitable home loan lenders will pop up. You can compare amongst the lenders to zero on the one providing the best deal.