Lesser Known Benefits of Home Loans

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Lesser Known Benefits of Home Loans

Lesser Known Benefits of Home Loans

  • Highlights

  • Home loans come with a lot of tax benefits

  • They have long repayment tenors

  • Part prepay home loans without incurring penalties

  • Joint home loan offers tax benefits to all applicants

Real estate prices in India are sky high, particularly in major cities like Mumbai. The dream of having a home of one’s own is difficult for the average Indian, without some external financial help. That is where home loans come in.

Home loans are usually provided to an individual to buy a house. The property is generally mortgaged with the lending organisation till the repayment of the loan. So, the lender will have the deed of the house till the housing loan amount is repaid in full along with the due interest in the allotted time. A home loan can also be taken for the construction or renovation of a house.

Home loan benefits

Following are the home loan benefits that you need to know:

1. Tax benefits

Government of India offers tax deduction on the principal as well as interest paid on home loans to encourage people to buy their own houses. An individual is eligible to claim a deduction of up to Rs.1.5 lakh in a financial year, under Section 80C of the Income Tax Act, 1961. Moreover, a deduction of up to Rs.2 lakh is allowed on the interest portion under Section 24B of Income Tax Act. However, the deductions under income tax are only presented after the construction of the house is complete. You can’t claim the income tax deductions while the property is under construction.

2. Tax benefits on the second house

In case you want to buy a second house, you are eligible to claim deduction for the entire amount of housing loan interest paid under Section 24B of the Income Tax Act of India.

3. Zero part prepayment charges up to a certain limit

Most home loan lenders allow part prepayment up to a certain limit without levying any penalties for it. This limit may vary from lender-to-lender. In some, cases you may even be able to part prepay regularly. This reduces your principal amount, and in turn your interest paid.

4. Long repayment tenure

Home loans usually have the longest repayment tenors, which may extend up to 30 years. This allows individuals to have lower EMIs, making it easier for them to budget their monthly expenses. However, long tenors also mean a higher interest pay-out.

Home Loan EMI Calculator

5. Benefit for joint owners

If you take a loan with your partner and share a 50-50 ratio of the loan payment, both of you can claim deductions under Section 24 and Section 80C separately. You would be able to deduct a combined total of Rs.4 lakh under Section 24B and Rs.3 lakh under Section 80C. This can reduce your overall expenses significantly.

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