Home loans: Should you opt for it?

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Buying a home is one of the most important life decisions. Many people save for almost half of their lives to just buy a home. Majority avail home loans to purchase a house and pay monthly EMIs. A home loan can be used when there is a shortage of funds. But, is it the right time to take a home loan?

Money9 spoke to Rachit Chawla, CEO & Founder, Finway FSC, to help you understand if you should go for a home loan or not.

Q. Is it beneficial to take a home loan?

Rachit: Yes, absolutely. Keeping in mind the current scenario and the current market rates where the interest rate is down and property prices are also reasonable, you must definitely avail a home loan because what is likely to happen is over a period of time, like other things, property prices will also increase. I see a lot of increase in property prices till 2025. Next 4 years will be a boom whereas you will end up paying a very low interest which is 6.90. A lot of companies are offering that sort of home loans so it is going to add as a huge cost saver and a great investment in the asset class.

Q. Who should take a home loan and who should avoid?

Rachit: Anybody having recurring income or have rent out the property should definitely avail a home loan because, in the long run, a rental is an expense whereas home loan will build into an asset and people should definitely go for that. However, it should not be used solely for the purpose of speculation of people who should not get into the asset class, because it is not that liquidated. Hence, it should not be used from speculation perspective and people who are not certain about their revenue for paying EMIs should not go for any type of loan.

Q. What are the tax benefits in taking a home loan?

Rachit: A home loan can be a good instrument to save tax. Few tax-benefits are- deduction for interest paid on housing loan, deduction in respect of interest paid towards home loan during pre-construction period, deduction on principal repayment, a deduction for stamp duty and registration charges.

Q. What if someone defaults on EMIs?

Rachit: If you fail to pay your EMIs on time, your lender may declare you as a defaulter and your CIBIL score will suffer. You might also be required to pay late fees, penalties, etc., which only further increase your financial burden. In that case, one should definitely get their home loan amount insured as the policy vendor will settle the outstanding dues with the lender in case something goes awry and protect the dependents from becoming homeless.