A LOAN FOR YOUR OWN HOME

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There are people who are interested in buying a new home but are hesitant because of financial issues and are also not confident enough to take a home loan. If you are also not sure if you should take a home loan or not, reading this article may change your mind. Here are a few reasons why you should go for a home loan:

  1. Tenure: The tenure of home loans is longer as compared to the other loans and it varies between 5 years to 30 years. This makes it possible for the borrowers to repay the loan as per their convenience.
  1. Tax benefits: There are a few tax benefits that you get if you take a home loan.
    • Deduction on stamp duty and registration charges: Under the Section 80C, payment made for stamp duty and registration charges can be claimed within the year of paying these charges.
    • Deduction on interest paid: As per Section 24(b) of the Income Tax Act, 1961 a deduction up to Rs. 1.5 lakh towards the total interest payable on the home loan towards purchase / construction of house property can be claimed while computing the income from house property.
    • Deduction on pre-construction interest: You can also claim pre-construction interest from the year when the construction is complete. It can be claimed in 5 equal installments and the total amount should not be more than 2 lakhs.
    • Deduction on the principle repayment: As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs. 1 lakh on your home loan will be allowed as a deduction from the gross total income subject to fulfilment of prescribed conditions.

Before applying for a home loan, you should keep a few things in mind which could be responsible for approval or rejection of your loan application:

  1. Job stability: Most of the banks make sure that you have a stable employment and you are not changing your jobs very often. They do this to make sure that you will be able to repay the loan within the loan tenure.
  2. Credit score: Having a bad credit score or credit history can be a reason for rejection of your home loan. You must check your credit score before you apply for a loan. For making sure that your home loan is not rejected you should always maintain a good credit score.
  3. Age of the borrower: Age of the borrower plays a significant role in deciding whether the application will be approved or rejected. Banks do not prefer lending money to people who are near their retirement age. It is because in a few years the borrower will not have a constant source of of good income and so it will be difficult for him to repay the loan.
  4. Address in defaulter’s list: If you are taking a loan for a house in which a defaulter had stayed in the past, it is going to be difficult to get the loan. By defaulter we mean someone who did not pay his debts in time, or did not pay credit card loans, etc.
  5. Guarantor to a defaulter: If you are a guarantor to a defaulter, then it is going to be difficult for you to get the loan. You should agree to be someone’s guarantor only if you are sure that the person will be able to pay the amount he has borrowed.
  6. Unpaid dues: As already mentioned earlier, that your credit score history matters a lot in case you are applying for a home loan and for maintaining a good score you should make sure that you make all the payments like dues or EMI’s of other loans on time.
  7. Being a fresher: For determining the stability and repaying capacity of the borrower, the bank checks that the individual has worked at least for an year in the same company. So, if you are a fresher there are chances that your home loan will be rejected.
  8. Being an entrepreneur: If you have just started as an entrepreneur, there are great chances that your home loan will be rejected because there is no measure to check your stability or capability to repay the loan.
  9. Policy guidelines of the bank: For applying a home loan, you should choose a property which is easy to sell,not very old and is in demand. Also you should make sure that the builder also should have all the necessary documents.

These are  a few reasons why your home loan could be rejected. So to increase the chances for approval of the loan, you should make sure that you do not come into the above mentioned categories.

Some common mistakes people make while applying for the home loan:

  1. Not negotiating: The cost of your home loan is negotiable. Most of the people are unaware of this fact and they agree to everything that the bank tells them. The terms and conditions are negotiable, so you can negotiate with the bank in case you are not satisfied with something.
  2. Borrowing more money than you can repay: Before applying for a home loan, it is necessary that you calculate the amount that you need to borrow by keeping in mind how much you can repay.
  3. Not considering additional charges: When buying a new home, most of the people ignore the extra mandatory charges like the taxes or maintenance costs. When you take a loan make sure you consider the additional charges also while calculating the cost of the loan.
  4. Not researching well: First thing you should do before taking a home loan is research well. Compare home loan offers of as many banks as you can to get the best offers for yourself at a lower interest rate and suitable tenure.

By considering the above mentioned factors, you will be able to get a home loan suitable for you which makes the repayment of the loan easier for you.

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