FEW WORDS- ARTICLE – HOME LOAN: POINTS TO KEEP IN MIND

As an investment, the house offers rental income plus capital appreciation. There are certain other benefits as well, which include tax exemption up to Rs 2.00 Lakh. But there are other factors too, that need to be considered before buying a home on finance. 

  1. Long repayment tenor: Say, a home loan of Rs 10.00 Lakh is offered for a tenor of up to 30 years or till the age of 70 years. If we consider rate @8%, you end up paying Rs. 5.52 Lakh more if the tenor is increased from 10 years to 20 years & Rs 11.86 more if changed from 10 to 30 Years. So, you should explore the possibilities of choosing minimum tenor.
  2. Part-payment clause:  Any sudden bonus, investment returns or any windfall gains may be utilised to reduce your liability and thereby spending less on interest. 
  3. Insurance of the property & the borrower: Banks insure your property as per their policy not as per your requirement. So, choose your home insurance yourself. Secondly, insurance your home loan liability by getting it insured to protect your family from harassment after you.
  4. Floating rate of interest:  If you choose a fixed rate, you are deprived of the benefit of lower interest going forward & also in most cases fixed rate is offered by adding a premium to floating rate ab-initio. 
  5. Avoiding cross-selling by bank : Banks often offer top-up loan, credit cards, cheap personal loans, insurance to existing housing loan borrowers due to availability of security i.e. your house. You must refrain from accepting such offers as it may result in a debt trap.

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