Why are Home Loans unique?

[Kanika Shelatkar]

Property prices have increased and hence, you need to apply for Home Loans. It has become a global phenomenon. However, before you venture into that territory, understand the nature of such loans and how they work. Here are some facts that every borrower must be aware of:

You have the option of going for a Home Loan with one of the two Home Loan Interest Rates: floating or fixed. Interest rates on the former fluctuate according to market conditions, while on the latter, you pay a fixed rate for the entire period.

A Home Loan is not just for buying a new building. You use them for purchasing a second home or a plot. You even get a loan for restoring and renovating your old building.

Banks make it possible for you to purchase your dream house. They even assist you in receiving tax benefits. A borrower deducts the principal and the interest portion of a Housing Loan under different sections of the Income Tax Act. In India, you receive a deduction on the principal portion's repayment under Section 80C, where the limits are set at Rs. 1.5 lakh.

On the other hand, you also claim exemptions on the Home Loan interest rate under Section 24 of the Act. The deduction cap is Rs. 2 lakh in this case.

You still prepay a loan to get rid of the debt earlier rather than later. More significantly, you need not pay the penalty if you pay off early. The RBI ordered lenders to waive them off on the floating Home Loan rate of interest in 2013. However, if you have a fixed loan, lenders charge a conversion fee. However, if you have a fixed loan rate, you do face penalties.

If required, you transfer your loans to another lender. This reduces the loan's expense. For example, suppose you took a loan from one lender, which charges you an interest rate for Home Loan of 11%. If you learn that the second one is offering you 9% interest rates, move your Loan. Lenders often charge a fee to transfer a loan.

Your Home Loan eligibility is the deciding factor in the lender's decision to approve the loan. It is easier to secure one while you are younger and receive a decent salary. Even if you have a good monthly income, your eligibility declines as you get older.

https://www.bankofbaroda.in/home-loan-eligibility-calculator.htm