A home is one of the biggest investments one can make in their life. It is an investment that has a legacy that can be carried down through the ages. Or it can be an investment that quickly multiplies the money that you have used to purchase the home.
For whichever of these reasons that you choose to take a home loan, there’s no denying the fact that buying a home is a big-ticket investment. It’s one that you should save up for years, however, it’s not always difficult to repay a home loan.
Home loan Interest Rates
Calculating the interest that you pay for a home loan is not as difficult as it used to be, as now home loan calculators are easily available online. Interest can be high if you choose to pay a low EMI or extend the tenure of the loan.
- Calculate the EMI so that you can have a low loan tenure.
- Interest rates can adversely affect the cost of a home, so choose wisely.
- Make frequent part payments to reduce the tenure of a loan.
- Pay a large down payment to reduce the loan amount.
Investing the EMI
Banking and financial institutions offer a number of services that can allow you to grow the EMI of your home loan. For example, if taking a home loan of 1 crore rupees – save 15,000 rupees a month aside from the EMI and invest it in a SIP. In just 5 years, this amount will grow to Rs. 11 Lakh, which will reduce the loan tenure by 18 month – hence helping you save on the interest too.
- Invest money in SIPs and Fixed deposits with the goal of growing the EMI amount.
- Use FDs to make part payments or to gain interest on the EMI amount.
- Making a large down payment reduces the loan burden, so start saving early.
Availing Tax benefits
There is a lot of tax benefits that are associated with a home loan. This money can be reinvested in the EMI to shorten the loan period. Let’s take a look at a few ways you can save taxes on a home loan.
Tax deduction on Interest
The EMI of a home loan can be claimed as a deduction. You can save a maximum of 2 Lakhs on deductions.
Tax deduction on Principal
The EMI that you pay for the principal component can be claimed as a deduction up to Rs. 1.5 Lakh.
Deduction on Registration Charges and Stamp duty
Payment made towards registration charges and stamp duty can be claimed under Section 80C.
Home Loans below Rs. 35 Lakhs
Additional tax deductions can be claimed up to Rs. 50 Lakh
All this money saved on taxes can be redirected to EMIs or can be used in SIPs to further grow your wealth in order to quickly repay a home loan.
Getting a home in a good location is always recommended per future prospects and hence, you need to choose wisely before getting into any hasty decision as you are going to invest a hefty portion of your income.