For most Indians, buying a home is probably life's most significant financial decision. And with ever-increasing real estate prices, taking home loans becomes imperative. As per the latest data, 63% of new home buyers take home loans to finance their dream. Though taking a mortgage helps make the property affordable for the buyer, it also brings worry about paying interest and EMIs for an extended period in the future, which can be taxing. So, buyers often have a dilemma- “Should we invest our savings in buying our new home or take a mortgage instead?”

Nevertheless, as per experts, a loan is the most significant catalyst to fulfill our dreams. They believe there are multiple other benefits of taking a home loan, which can also be used for financial planning. Let’s examine some of them-

1. 1) Affordability - The home Loan makes it easier for a person to afford a home of their own. Usually, banks fund up to 80% of the property value- thus, one can easily take the property of 5 times the value of personal savings.
2. 2) Cheap interest rate - One of the significant home loan benefits is that it comes with a lower interest rate than other forms of borrowing like a personal loan or gold loan. This is because the lender uses the property you wish to purchase as security against the amount you borrow. These days, most banks charge interest rates of 6.7%- 8.5% per annum, which are theoretically the lowest. Considering the usual empirical growth of real estate property in India, this can be profitable.
3. 3) Extra returns - Over the past decades, the cost of real estate properties in India has been on the rise consistently. Many experts suggest that the capital appreciation of real estate properties has been much higher than the interest you pay on a home loan. In case one decides to buy a house property with own money, the capital growth will be limited to the investment made. However, if a home loan is taken for 80%, the capital growth will happen for overall property value, which would be much higher than self-funded property.
4. 4) Tax benefits - - To encourage more and more people to buy their own houses, the government of India provides tax deductions on the principal and interest paid on the home loan. An individual can claim a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax of India 1971 Act in a financial year. In contrast, a determination of up to Rs 2 lakh is allowed on the interest portion under Section 24B of the Income Tax of India Act. Experts believe one can save up to 25% of the EMIs due to tax benefits.
5. 5) EMI as a Compulsory way of savings The money you pay towards the EMI, you can look at it as a saving rather than an expenditure. This is because after you repay the loan entirely, you will become the complete owner of the house, which will have an increased value at the end of the loan tenure.
6. 6) Nil Prepayment - - Unlike other consumer loans, there’s zero prepayment penalty on home loans with floating interest rates. You can make innumerable pre-payments in your home loan account. So, whenever you have surplus money, you can utilize it for making a partial payment towards your home loan and lower your burden.
7. 7) Improving credit score - When your home loan is in effect, and as you continue to repay the amount diligently or if you have already repaid the loan in full, your CIBIL (Credit Information Bureau (India) Limited) score will automatically increase. The lenders will classify you as a safe and responsible borrower. This will help you improve your loan eligibility.
8. 8) Due diligence of property by the bank - - Banks undertake strict due diligence before financing a housing project. If the banks approve any housing project, it validates the credibility of the project promoters and paperwork.
   Considering all the benefits, it’s a financially wise decision to take a home loan rather than using personal savings to buy a new home.

ADVANTAGES OF HOME LOAN

1. 1) Tenure - You can get a loan and pay it in an installment in a particular tenure. You can choose the term. This is one of the best advantages of taking a Home loan. You can get the loan and make a tenure to pay the loan in EMI. The maximum loan tenure for housing loans is capped at 30 years.
2. 2) Low-interest rates - You can get a home loan at a lower interest rate. You can compare the various bank and choose as suitable for your requirements. Home loans have become very affordable today, with interest rates moving down recently. Lower interest rates result in lower EMI amounts, making home loans more attractive and cheaper.
3. 3) Instalments - If you are thinking of not taking a loan, then you have to pay the total amount simultaneously, but if you take a loan after receiving the loan, you can make installments and pay it every month. This makes you burden-free from paying all the amount.

DISADVANTAGES OF HOME LOAN

1. 1) LOSS OF INVESTMENT OPPORTUNITY - When you apply for a loan, irrespective of big or small the loan amount is or how long or short the duration is, as you continue to repay the amount, you lose the opportunity to invest the same amount in an investment tool that could yield you valuable returns.
2. 2) HOME LOAN MAY CARRY RISKS: - The home loan duration typically spans 10 to 30 years, which is quite a long time. If you fail to repay the loan, the lender has the authority to take over the property and sell it to gain back the money they lent you as a home loan.
3. 3) Long-Term Commitment - A Home Loan is a long-term commitment of at least 15-20 years. ... This is why you must always keep an eye on your outstanding Home Loan amount. A periodic review of your Home Loan amount will help you decide if your loan needs a foreclosure, top-up, or a balance transfer.