The experience of buying a new home is full of fun and excitement. It gives you lessons you can utilize while making other significant investments in life. However, before finding a home of your dreams, you need to decide how you will finance this life-long possession.
If you are a salaried individual living in a small home, you might have been saving some amount every month to own your dream home. Given the rising cost of properties in India, it would still take many more years for you to live this dream through your savings. Worry not, as there is another option to help you out – Home loan.
In simple words, home loan means dividing the total cost of your new home into smaller EMIs. You can get an idea of the estimated EMI to be paid using online EMI calculators.
So, what constitutes a home loan EMI and how is it calculated? Read more to find the answer.
Home Loan EMI – Making You Buy Dream Home Easily
An EMI or Equated Monthly Installment is the fixed amount you need to pay to your lender to repay your home loan over a specific tenure. It is usually paid every month on a chosen date and has two components – the principal amount and the interest.
Depending on the chosen lender, which can be a bank or an NBFC (Non-Banking Financial Corporation), you need to pay the interest at a specific rate on the principal amount you borrow. Although different banks offer home loans at different rates, it is quite easy to use EMI calculators online and get to know the total interest to be paid over the loan tenure.
In the initial year of repaying your home loan, your EMI includes the lower principal amount and comparatively higher interest. However, as the tenure progresses, more principal amount gets repaid in every EMI along with lower interest.
Here is why you should opt for a home loan as per your eligibility and repay it in EMIs:
– Flexibility to Repay Loan Amount
People generally borrow home loans for a long tenure, usually longer than ten years. This gives them enough time to repay the loan without facing any financial burden.
Now think of it the other way around. Let’s say you are eligible for a home loan of INR 10 lakhs at an interest rate of eight percent. For ten-year tenure, its EMI as calculated using an online EMI calculator comes out to be twelve thousand rupees approximately. What if you find it hard to pay this EMI every month?
There is nothing to worry about. Increase the tenure from ten to fifteen years, and the EMI will drop down to around nine thousand rupees.
This flexibility in repaying the loan won’t have any adverse impact on other significant aspects of your life.
– Tax Benefits while Filing Your ITR
With a home loan, you also become eligible for tax benefits at the time of filing Income Tax returns every year. As per the Income Tax Act, 1961, repayment of a principal amount of up to one lakh rupees for a home loan is tax deductible every year.
Similarly, you can seek tax deductions on the interest you pay per annum to an upper limit of INR 1.5 lakh rupees. Even the home loan processing fee you pay to the chosen lender is considered as the interest and can be deducted from your taxable income.
Collectively, you can save a considerable amount when choosing to pay for your new home through a home loan in EMIs.
– Property Value Appreciation in Future
Compare the present home construction costs with that of the past, and you will see the big difference between the two. Alongside this, the demand for quality housing is high. You can easily find people willing to pay high rent for good quality homes.
Making a real estate investment in the present with the help of a home loan can turn out to be highly profitable in the future. As per the rate of property value appreciation, your home’s value will rise as time passes, thus making you earn more whenever you plan to sell it.
Borrowing a home loan and repaying it in affordable EMIs is advantageous for you in several ways. You can use online EMI calculators to check and find an EMI you can easily pay for your home loan and enjoy living your dream as early as possible( Source:punjsbnewsexpress.com).