The Ultimate Home Loan Guide For First-Time Home Buyers In India
Choosing the right home loan is extremely important when you are a first-time homeowner. This is a huge purchase, and your decisions will determine whether or not this purchase ends up being the right one.
This blog helps you decide this by giving you essential tips and questions to ask your lender. When used right, these tools can save money and help you secure the first home loan that meets your needs.
Applying for a Loan
If you are looking to take out a home loan in India, there are a few things you need to keep in mind.
- First, you will need a good credit score to get approved for a loan. Additionally, you will need a steady income and a down payment saved up to qualify for a loan.
- Taking out a home loan in India typically involves going to a bank or financial institution and applying for a loan.
- You will need to provide documentation such as your income statements, tax returns, and other financial information to have your loan application approved.
- Once you have been approved for a loan, you will need to work with a loan officer to determine the terms of your loan. This will include the interest rate, the loan length, and the monthly payments.
- Once you have agreed to the loan terms, you can sign the loan documents and officially take out your loan.
Repaying a Loan
If you’re considering taking out a housing loan, you’ll need to consider how you’ll repay the loan. There are a few options for repaying a housing loan, and the best choice for you will depend on your financial situation.
- You can make regular payments over the life of the loan through EMIs, or you can make lump-sum payments to pay off the loan more quickly.
- You can also make interest-only payments, which can lower your monthly payments but will mean you’ll owe more money in the long run.
Whatever repayment option you choose, be sure to budget carefully to make sure you can make your payments on time.
Choosing the Right Housing Loan
There are a few things to consider when choosing the right housing loan in India.
- Interest rate: Compare rates from different lenders to get the best deal.
- Loan term: Choose a period you are comfortable with that meets your financial needs.
- Repayment options: There are many options available, so make sure to choose the best option.
- Fees and charges: Compare these to ensure you are getting the best value for your money.
Tax Benefits on Housing Loans
Housing loans in India come with several tax benefits, making them an attractive proposition for home buyers.
- For starters, the interest paid on housing loans is eligible for tax deductions under Section 24 of the Income Tax Act. This deduction is available for self-occupied up to a maximum of ₹2 lakhs per annum and rented properties with no ceiling limit per annum . In addition, the principal repayment component of housing loans is eligible for tax deductions under Section 80C of the Income Tax Act. This deduction is available up to a maximum of ₹1.5 lakhs per annum.
- Another critical tax benefit on housing loans in India is that the stamp duty and registration charges paid on the purchase of a property are eligible for tax deductions under Section 80C of the Income Tax Act. This deduction is available up to a maximum of ₹1.5 lakhs per annum.
- Housing loans also benefit from home loan interest rate deductions under Section 80EE of the Income Tax Act. This deduction is available up to a maximum of ₹50,000 per annum which is subject to multiple conditions.
- Lastly, Section 80EEA of the Income Tax Act allows a deduction for interest paid up to a maximum of ₹1.5 lakhs per annum which is subject to multiple conditions. The deduction under this section is mutually exclusive of Section 80EE.
- If the property is co-owned jointly, it is suggested that the loan is also taken jointly as deduction under Section 24Bb & Section 80C can be claimed by both co-owners upto a maximum limit of ₹2 lakhs & ₹1.5 lakhs per annum respectively.
Where to Take a Housing Loan From
There are many options for taking out a housing loan in India. The most popular options are banks, housing finance companies, and NBFCs (non-banking financial companies).
- Banks are the most common source of housing finance in India. They offer a wide range of products and services and have a vast network of branches across the country.
- Housing finance companies are another popular option for housing loans in India. They offer specialised products and services and have a good understanding of the Indian housing market.
- NBFCs are a relatively new entrant into the housing finance market in India but have quickly become a popular option due to their competitive interest rates and flexible repayment options.
There are many factors to consider when choosing the right housing loan in India. The interest rate is one of the most critical factors, as it will determine the amount of interest you will pay over the life of the loan.
The loan term is also essential, as a longer loan term will result in lower monthly payments, but you will pay more interest over the life of the loan. Another factor to consider is the loan amount, resulting in a lower interest rate.
Lastly, you will need to consider the down payment, which will affect the interest rate and the monthly payment.
How do I repay the loan?
The loan has to be repaid within a maximum period of 30 years.
What is the interest rate on the loan?
The market conditions determine the interest rate on the loan at the time of availing the loan.
Are there any other charges associated with the loan?
Yes, other charges are associated with the loan, such as processing fees, stamp duty, etc., which are to be borne by the borrower.
How do I apply for the loan?
You can apply for the loan through any participating bank or financial institution’s website.